Asia draws bigger 2026 PE allocations as Japan, India lead: report

Report cites weaker yen, low rates, and reforms lifting Japan's large-cap activity; India draws control-stake focus.

Asia is expected to take on greater importance in global private equity allocations in 2026, with increased inbound investment into markets such as Japan and India, according to Morrison Foerster’s Global PE Trends 2025 and Outlook for 2026 report.

The report said Japan and India are likely to see heightened PE activity, with Japan in particular attracting more large-cap and mid-cap deals.

It attributed this to factors including a weaker yen, low interest rates, and ongoing corporate reforms aimed at unlocking shareholder value.

Take-privates, co-investments for larger transactions, carve-outs, owner succession deals, and infrastructure investments are expected to remain active, with sectors such as semiconductors, automotive components, electronics, life science,s and healthcare highlighted as areas of interest.

In China, Morrison Foerster expects a gradual recovery in private equity activity in 2026, supported by policy stabilisation and an improving macro backdrop.

Deal activity is expected to be led mainly by Asia-headquartered and China-focused general partners, as well as government-backed vehicles targeting priority sectors such as semiconductors, artificial intelligence, and renewables.

The report also noted continued participation by Middle Eastern sovereign wealth funds through co-investments, strategic partnerships, and direct deals, and said improving IPO sentiment and liquidity in Hong Kong could help support exit confidence.

Southeast Asia is expected to see deal activity driven by investment in technology, AI integration, and data centre infrastructure, although the report cautioned that regulatory scrutiny and foreign investment controls, including national security and geopolitical considerations, are adding complexity.

It said secondary buyouts and continuation funds are gaining traction in the region as flexible exit structures to manage liquidity and extend holding periods.

India was described as a continued magnet for private equity, underpinned by structural growth and resilient fundamentals.

The report said investors are increasingly focused on acquiring controlling stakes and driving operational value creation, with greater emphasis on exit planning from the outset.

Across the region, Morrison Foerster said Asia’s medium-term outlook remains supported by underlying growth momentum and policy adaptability, with private markets expected to continue pursuing opportunities in technology, the energy transition, and healthcare into 2026.