Private equity deals in Asia are predicted to rise this year, with the biggest flows expected in Greater China and Southeast Asia, indicates an Ernst & Young survey.

Although PE executives took a similarly optimistic view at the start of 2013, deal flow for last year is expected to be up only slightly from 2012, when $41.7 billion was transacted through 391 transactions in Asia.

As of end-October, there were 319 deals worth $35.6 billion, with E&Y predicting that the FY2013 total will be slightly above the previous year, in terms of money invested.

“What’s interesting is that the volume –  the number of deals – will be down,” says Bob Partridge, Asia-Pacific and Greater China private equity leader at E&Y. “It means the average deal [size] has gone up quite a bit”, he adds, citing this as a sign of maturity in the region's PE market.

Uncertainty in Indonesia – Asia’s PE hotspot – unexpectedly put a brake on deals in Southeast Asia last year due to political uncertainty and currency volatility. “The hottest growth market, in terms of M&A, suddenly slowed,” says Partridge.

Only $2.1 billion was transacted through 21 deals in the sub-region last year, compared to the $6.6 billion in dealflow over 27 transactions in 2012, according to the E&Y report, A maturing market: Asia-Pacific private equity outlook 2014, released yesterday.

However, Southeast Asia remained on investors' radar last year due to two prominent transactions in Vietnam: Warburg Pincus’ $200 million deal with real estate operator Vingroup, and KKR’s $200 million investment in food producer Masan Consumer Corp.

Greater China also saw a drop in deals last year, to $5.7 billion over 45 transactions, compared to the $10.1 billion brought in through 82 deals in 2012. E&Y attributes it to expected slower economic growth in the mainland and the difficulty in exiting investments due to a freeze in IPOs.

However, there is optimism for improved market conditions in both the mainland and Southeast Asia, with 56% of PE executives predicting that Greater China will see the region’s most deal activity in Asia this year, while 36% believe Southeast Asia will lead transactions.

Interestingly, South Korea saw a sharp increase in deal values last year, with $7 billion transacted over 34 transactions – nearly double the $4.5 billion via 32 deals in 2012.

E&Y attributes interest in the country to “the glean wear[ing] off Asia’s other major investment destinations” and a deviation from Southeast Asia due to higher valuations.

South Korea also played host to the Asia’s largest PE deal last year: Seoul-based MBK Partners’ $1.6 billion acquisition of ING Korea Life Insurance, approved by regulators last month.

While South Korea has gained more attention, “the scale of Korea is limited”, says Partridge. “What it does signal is that PE is increasingly being accepted [domestically],” although deals tend to be awarded to local, rather than global firms.

The opinions in the E&Y report are based on a Mergermarket survey of PE investors, institutional investors and PE investment bankers, all based in Asia Pacific.