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“Investment banking pins hopes on Asia”, reports the FT on Tuesday, summing up an increasingly common refrain among bankers.

The latest figures from Thomson Reuters would appear to confirm the optimism of bankers such as John Thain, who, when he arrived in India last week for his first visit as chief executive of Merrill Lynch, told journalists he was so bullish about the country he had acquired a 10-year multiple-entry visa.

So far in 2008, overall M&A in the Asia-Pacific region, including Japan, garnered $252.3bn from 4,602 deals. While that is down by 1.9 per cent from the same period last year, it makes a striking contrast with the dismal global M&A trend, which plunged 36.9 per cent by volume to just over $1,000bn, according to Thomson.

Financials companies in the region emerged as the most sought after targets for takeovers. The sector captured 25.6 per cent market share or $64.5bn of overall M&A activity. Materials and energy and power rounded out the top three sectors with nearly $51bn and $40.8bn, respectively.

And the flow goes two ways with Asian investors, from large corporates to SWFs, showing increasing appetite for western targets. So far this year, US companies have been the most sought-after by businesses from the region for cross-border acquisitions, according to Thomson. Announced cross-border investments into the US have amounted to $26.8bn in 2008. The acquisition of Millenium Pharmaceuticals by Takeda of Japan (worth $8.2bn alone) brought about the surge in volume, Thomson adds.

On top of all that, Deutsche Bank estimates in its annual Alternative Investment Survey, issued Tuesday, that investors may pile more than $200bn of fresh capital into the hedge fund industry this year - and that strategies focused on Asia ex-Japan will be in strong demand, despite concerns about the global economy and waning risk appetite. Hedge fund investors’ predictions that Asia, along with the Middle East and Latin America, will be the top-performing regions in 2008 “indicate a clear re-allocation of capital towards emerging markets,” Denis MacCarthy, head of equity sales Asia ex-Japan at Deutsche Bank said in a statement on Tuesday.

Like Merrill, most global investment banks are hoping that India and other high-growth Asian markets will help rescue bottom lines scarred by the credit crunch and the slowdown in the US, Europe and Japan. Thain said this week that 60 per cent of Merrill Lynch’s revenues come from outside the US, a ratio he hopes to increase this year through growth in India, China, Brazil and Russia.
Their faith was rewarded this month with news Bharti Airtel, India’s biggest telecom operator, was considering paying $19bn for a 51 per cent stake in South African counterpart MTN Group. The deal would be the biggest cross-border acquisition in the emerging economies of Asia, including China.

Indian companies have this year completed $8.92bn of acquisitions of overseas companies, down 63 per cent from the same period a year before, according to Dealogic. But if Bharti turns its indicative offer for MTN into a completed deal, the level of Indian outbound M&A this year will jump sharply to near-record levels.

The offer comes as other Asian markets are also looking more active. Aluminium Corporation of China this year undertook what is so far the region’s biggest completed cross-border deal with its $14.32bn acquisition of a 12 per cent stake in Rio Tinto, based in the UK.

Frank Hancock, managing director of ABN Amro in India, told the FT that the bank had eight to nine mandates for acquisitions of overseas companies by Indian groups, with each prospective deal valued at between $300m and $5bn. “Even though in the first quarter the volume of M&A has fallen a bit, I wouldn’t be surprised to see volumes this year approaching the same as last year,” Hancock said.

With relatively low levels of debt, the balance sheets of large Indian groups remain strong enough to continue to support acquisitions abroad - and the same goes for groups in other countries, particularly the cash-rich and acquisitive Asian SWFs such as Temasek and GIC.

So who is making money on the investment banking side from this growing Asia interest? UBS ruled Thomson’s announced Asia-Pacific, Japan tables as top financial adviser, with $47.4bn in total rank value. The bank has participated in five out of the top 10 M&A deals in the region this year.

Needless to say, all this is generating strong interest in bankers of all kinds with Asian experience - as seen in the increasingly active job market in the region and the latest example of talent poaching: Barcap’s raid, reported Tuesday, on the ABN Amro ranks.

According to the FT’s investment banking correspondent Chris Hughes, growing confidence among investment banks about prospects for increasingly robust activity in emerging markets is likely to see some London and New York-based bankers being asked to relocate.

There is always a case for caution, however. A severe economic downturn, or sustained weakness in the equity markets, will mean that cutbacks spread from the credit desks more broadly, notes Hughes. However, even in this scenario, there will be scope for some bankers to “re-tool” themselves.

Lex, meanwhile, warned last year that Asia’s markets, with a few notable exceptions such as Thailand, are expensive in historical terms at 16-20 times earnings for 2007. Estimated earnings growth, both in 2007 and 2008, was mostly in the 10-20 per cent range, but there were a few dull patches - including Hong Kong and Singapore. Currency appreciation, while good for overseas investors, was crimping profitability at Korean and Indian exporters.

But none of that matters a whit, concluded Lex, so long as the funds keep coming. On that score, there is every reason to be optimistic - even if foreign money stages a reversal. There is an abundance of local money, as seen in continuing appetite for IPOs in the region. More aggressive investment mandates for billions of dollars in foreign exchange reserves and pension funds are also supportive.

Perhaps, like Thain, multiple-entry visas to Asia’s top investment spots should be a pre-requisite for senior bankers.