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China's outbound investments accelerated to $21.4 billion in the first three months of 2012 after stalling last year, with assets in the resource sector and South America the most sought-after by mainly state-backed buyers, a study showed on Thursday.

A $4.8 billion deal struck in March by Sinopec, China's second-largest oil-and-gas producer, for 30 percent of Petrogal Brazil was the quarter's single biggest deal and one underlining an emerging trend in Chinese minority stake purchases.

"Minority deals represent a clear majority (78 percent) of total deal value," said a statement from A Capital, a private equity fund specialising in Chinese outbound investments and compiler of a quarterly index tracking Chinese outbound direct investments (ODI).

"Going for a minority stake is increasingly recognised as a way to tap into high quality assets that would otherwise not be for sale or out of reach for Chinese investors," the statement said.

That approach has been followed since 2009 when Australia outlined its preferences for foreign investment in big firms, pointing to the types of deals which would and would not succeed after a flurry of failed Chinese bids for resource assets.

A key objection to Chinese asset purchases by many overseas governments and regulators is the state's heavy involvement in transactions. State-owned enterprises generated 98 percent of all deal value in Q1, according to A Capital's study.

The role of private firms in China's ODI shrank in the first quarter, representing 42 percent of deal volume versus 47 percent of deals struck in Q1 2011.

Private firm activity is mainly in smaller transactions. These were worth a tiny 2 percent of the overall 2012 Q1 value.

BEHIND TARGET

The current run rate for transactions leaves China well behind target to spend $560 billion on overseas investments by the end of 2015.

Total deals in the first quarter lifted the A Capital Dragon Index up 2 percent versus the full year for 2011 to a level of 2,056 points. It remains beneath 2010's record high of 2,069. The index dropped in 2011 for the first time since 2003, falling 2.6 percent to 2,015 points.

ODI is now at an historic high of 74 percent of the value of foreign direct investment, according to A Capital. That compares with 20 percent in 2005 and the government's target to reach 100 percent by 2015.

Ministry of Commerce data shows that China attracted almost twice as much inward investment as the $60.1 billion it managed to send outbound in 2011. Roughly half of China's attempted foreign forays ended in failure last year.

A Capital believes deal flow has been driven by the likely bottoming of the global economic cycle in 2012 and China's determination to move its economy up the value chain.

That said, 92 percent of all merger and acquisition deals done by Chinese entities in the first quarter were in the resource and energy sector, worth a total of $10.2 billion.

Europe was the most popular destination for Chinese ODI outside of the resource sector, home to 83 percent of the non-resource deals in Q1, though remaining flat in value terms year-on-year at just $1.7 billion.

Brands, technologies and high-end manufacturing were cited as the main investment targets in Europe.

South America attracted 43 percent of China's ODI in the first quarter of the year, Europe took 16 percent, North America snagged 15 percent, with 13 percent going to Africa, 12 percent to Oceania and 1 percent going to Beijing's Asian neighbours.

The A Capital Dragon Index measures the growth of outbound investment stock relative to GDP. It aims to be a reference indicator tracking the globalisation rate of the Chinese economy since accession to the World Trade Organisation in 2001.

The index, started in 2010, collects information on confirmed deals exceeding $5 million which yield a stake of more than 10 percent in an asset.

This article is copyrighted by Reuters