Hong Kong is looking like an increasingly precarious place for corporate finance professionals to work in 2022.
Some banks are cutting staff after being hit by a triple whammy of strategic upheaval, over-hiring and a collapse in deal volumes.
UBS has become the latest firm to cut jobs in investment banking, following in the footsteps of western rivals Deutsche Bank and Credit Suisse, while a number of Chinese firms have also cut jobs in Hong Kong.
UBS Group AG is letting go of half a dozen mainland China-focused employees in Hong Kong. Reports said that UBS has been focused on the sale of Chinese junk bonds to wealthy clients, a business that has almost evaporated as Chinese property developers remain largely shut out of the market amid a deepening property crisis.
“Hong Kong is bearing the brunt of job cuts because it’s the biggest hub for underwriting and advisory and that’s where the biggest falls in activity have been,” said one Hong Kong-based banker. “At the same time, banks over-hired during 2020 and 2021 when the market for talent was red-hot.”
But a government clampdown on a number of industry sectors slammed the brakes on Hong Kong equity capital markets activity, the bedrock of corporate finance fees. Meanwhile bond underwriting has slumped along with M&A activity.
Hong Kong is also an essential hub for banks looking to serve mainland China, where long-term they still see great potential. Western banks have continued to expand their joint ventures on the mainland, but revenues have been hit by rising political tensions and draconian Covid measures.
Publicly banks are standing by their commitment to invest in mainland China, although some are reviewing those plans. Credit Suisse in particular could scale back its ambitions as new CEO Ulrich Körner presses ahead with a review of its investment bank strategy which will be unveiled in October.
With the outlook uncertain in China, banks are continuing to hire or relocate staff across the Asia-Pacific region, as many look to broaden an offering that has been too weighted towards Hong Kong. Nomura is looking to build out its investment banking coverage in Singapore, and HSBC is expanding its presence across South East Asia. Barclays, meanwhile, has been building its business in India. “In my discussions with big banks they are talking about hiring anywhere else but Hong Kong,” said one Singapore-based headhunter.
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