Among The Visa Winners The List Include Venture Caps And Small Caps

05 Jun 2015

The recent changes that were made towards the Australia’s significant investor visa can help quadruple inflows into the fledgling venture capital market to $500 million and it will also help in bolster the trading volumes in the small caps company segment on the ASX

During the last month the federal govt has announced a revamp of the visa scheme forcing the foreign investors who wish to acquire Australian Citizenship to step up investments in start-ups and emerging companies.

As per the new rules, while the total investment limit remains $5m, the foreigners would be able to invest minimum $500,000 into venture capital or private equity funds investing in small private companies and another $1.5m in managed funds or listed investment companies that invest 80% of their assests in emerging companies.

The balance of funds can be later invested in other listed companies, annuities or real assets, subject to a limit on property investment.

Strategist of Goldman, Mathew Ross has said the new requirement would shift the investment mix from the govt bonds as well as residential property and expand the Australia’s venture capital market and drive inflows into ASX-listed emerging Companies.

According to the Present Significant Investor Visa Program, the Wealthy foreigners can invest $5m towards the complying investments for atleast 4 years before they become eligible to apply for a permanent visa.

Most funds have typically flowed into govt bonds as well as residential real estate schemes, with 91% of SIV applications are from Mainland Chinese residents.

Mr Ross has said, the higher risk profile would not deter the future applicants the Australian govt would be able to continue grant visas at the current rate of nearing to 1000 a year.

At that particular rate, an annual investment of $50m was likely to flow into the venture capital market. That represents over four times the current industry inflow, estimated AT $120m.

A similar benefit was expected for ASX-listed small cap companies.  Presently, the emerging company segment comprise firms with market capitalizations of less than $500m it makes up 28% of the ASX small Ordinaries index and has an annual turnover estimated at $26 billion. The extra $1.5bn will flow into this segment through the SIV program and this would affect in significantly bolster trade figures, Mr Ross has said in a report to the clients.

The note said, that the initial level of SIV issuance is only fraction of the 3.5 million Chinese residents estimated with net wealth above $US5m ($6.47m).Goldman Sachs also estimated the capital flows to be around $10bn if the demand tend to increases and all available visas are granted to the  SIV applicants. 

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