CAT | Financial Services
Over the course of the last 18 months there have been very few bullish commentators on the Hong Kong stock market, and despite a natural tendency for us to be optimists, very little has been written or said to give us, or anyone else, cause for optimism.
With this in mind, when contemplating my response, to a banker posing me this question yesterday, I paused. All I could think of were the dire swathes of red under the IPO figures for this year, that I saw on our Bloomberg terminal earlier in the week.
I will not go into my response, but let’s say it was fairly muted.
Fast forward 24 hours and I am reading this article, ‘Bank predicts CSI to rise by 26% in 2013’ on China Daily.
What a difference a day makes!
Three things in particular gave me cause for optimism:-
- It appears that China will provide and adapt polices to support the equities market
- There are 800 IPOs in pipeline for China as a whole, which would mean that Hong Kong ought to be home to a few:- This should provide some well needed revenues for investment bankers.
- The Hang Seng is expected to rise to 25,000 by the end of next year – this can only be a good thing for secondary markets and trading after the volatility and stagnation we have seen over the last 18 months.
It’s good to hear some Bullishness again, after all the bad news we’ve had for what seems a very long time.
Let’s just say that from now until the end of the year, you will find me ever so slightly fuller of Christmas Cheer…
So as everyone gets in the festive mood looking towards Christmas and year end, many of us are wondering what presents to buy for our loved ones, thinking about all the dry turkey and spiced wine we will have over the next few weeks.
There are however the fortunate, or perhaps optimistic few within the banking world thinking about the extra money they’ll receive from their 2012 bonus. Many professionals within the banking and finance industry remain unsure as to how the bonus pool will look this year, but it seems many are still feeling somewhat hopeful for a good bonus. Let’s take a look at a few influencing factors.
Arguments for higher bonuses
- It would appear that whilst most bonus pools will likely be down this year, the reduction in headcounts across most teams could mean an increase on bonuses individually, with less people for the pot to be shared amongst.
- Many people within the banks will tell you, they have been working longer hours this year, many noting that reductions in staff levels this year hasn’t necessarily been due to a decrease in overall workload with the remaining staff taking on additional responsibilities and duties.
Arguments for lower bonuses
- Trading volumes have been down, and with that, revenues and profits have struggled in many areas, such as cash equity trading. It is likely that people covering certain investment product areas can expect a decrease off the back of this.
- There is an increasing pressure from the general public and even governing bodies, reportedly the FSA in the UK, that bonuses should be significantly reduced as banks look to make up for mistakes and stop rewarding the idea of short term gains and misrepresentation.
- Many banks implemented a new compensation structure over the last couple of years in which base salaries were higher and bonuses were reduced, so despite bonuses being down total compensation was at a similar level. As such, it would appear that this will likely continue to be a trend with bonuses potentially going to be down year on year.
It’s going to be a hard one to predict with people within the banking and finance industry feeling a good bonus is deserved and many others outside feeling the opposite. Either way, whether it’s higher or lower, hopefully it won’t ruin their festive season or their start to 2013!
‘Here is the City’ recently wrote an article describing how the New York and Hong Kong financial services markets would outgrow London in four years. If this is the case, this has got to be some positive news for the Hong Kong financial services sector.
The key arguments are sound enough with the article citing internationalisation of the RMB, economic growth in China and a more favourable regulatory environment. However, I think it doesn’t really take into account the challenges that Hong Kong faces against the nearest financial hubs of Singapore and Shanghai, and therefore potentially, the article is solely ‘pinning the tail’ on Hong Kong as many similar arguments could be applied to these other regional hubs.
For example, the Singapore government has significant tax incentives to new employers building out in the region and a recent article suggested that 57% of global multinational companies would consider Singapore over Hong Kong as their regional headquarters, and this is bound to have an impact on the growth here in Hong Kong.
That being said, traditionally, Singapore was seen as a lower cost option as salaries and the cost of living plus corporation tax rates made it favourable. With the strength of the Singapore dollar and the weakness in the greenback, there are many arguments to say that this is now not the case and the cost of living in Hong Kong is on par or even lower than Singapore.
Shanghai will surely become a significantly more mature market in due course with the internationalisation of the RMB and the growth of the domestic banking market, and this too will challenge this statement.
Even so, a 3.5% growth in the total number of city-type jobs in Hong Kong by 2017 to an estimated 277,000 will undoubtedly be good for the financial services market and the regional economy. This is a good thing for financial professionals in the Hong Kong market and those looking to move to Asia for their next career opportunity! However, it will put a significant pressure on the talent pool and the ability for financial services organisations to attract and retain their employees.
Morgan McKinley’s Hong Kong 2013 Hiring Market Report is now available. It provides analysis of trends and forecasts based on our survey of employers. We surveyed over 700 hiring and operational managers across financial services, as well as commercial organisations in Hong Kong and the Asia-Pacific region to give you a valuable insight into hiring trends for 2013.
We have also carried out similar research across China and Singapore and have included some of those findings in comparison to our findings across Hong Kong to highlight the similarities and differences in perspective across these three markets.
Download a copy of the latest Morgan McKinley Hong Kong Hiring Market Report here
I think – yes. With Obama’s re-election today this should be a positive news story for Asia and Hong Kong specifically. With the dollar-peg in Hong Kong, the US fiscal policy has a dramatic effect on businesses and individuals in the territory.
Obama was the safer bet in terms of him being positioned well after his four year term to negotiate with congress and get things done and this has got to be good news for the region. Furthermore, Mitt Romney’s outspokenness over US-China trade ties would have created significant tension between the two economies. Finally, I would say that stability, rather than change, in the US should allow for the US recovery to continue and further benefit the global economy as a whole.
So will the markets respond well to the news? I hope so but only time will tell……
After the terrible shock of Hurricane Sandy the US seems to be getting back to normal. Certainly the Presidential election is filling many column inches in the western press, whilst the upcoming Chinese leadership change is filling practically none. It is a fascinating time to see how these two global economic powerhouses work through their choices for an uncertain future. Our COO, Richie Holliday discusses this further.
To read more, click here.
Having read this recent article with interest, ‘Japan loses key finance roles to Hong Kong’ , I thought I’d look at some of the factors which could explain why these organisations have taken the decision to relocate key roles out of Japan.
With the venue for these new or consolidated roles to be Hong Kong, and the prominence of equities as an asset class here, I thought I’d look at this market and put forward 3 key factors which could have influenced management.
1. At the start of this year, the Japanese stock market has fallen to the level of 30 years ago.
Flight to safety, diversification of Japanese assets overseas, whatever the reasons, money has been leaving Japan for some time. Not the best of backdrops to increase headcount – in fact, the exact opposite.
2. The top 5 Japanese firms have brokered near on 90% of Japanese equity offerings this year.
In terms of underwriting, we have witnessed a significant decline in equities underwritten by foreign firms in Japan in recent years. Goldman Sachs, JP Morgan and Citi accounted for 20% of new issuances in 2009; this year they have accounted for just 2.2%.
3. Decline in OTC and rise in electronic trading
As demand for complex products diminishes, and markets become more automated, international brokers are increasingly using technology to supplement manpower. With less staff, there is less need for experienced ‘man-managers’ to be present on the ground in Tokyo.
With a beleaguered stock market, a very competitive landscape and technological factors reducing the need for team numbers on the ground in Japan, it is not surprising that international firms may seek to roll up Asia ex-Japan and Japan sales and trading activities under a regional head, and move towards fast growing Asian economies.
Given pressure on headcounts, it would be unsurprising if this decision had been taken to save costs, and may be a direct consequence of a shift towards low touch trading.
What is surprising is the decline in capital market activity that international banks are underwriting in Japan, and it’s bound to have a knock-on effect on their success in secondary markets.
With IPO issuances up 20% in Japan year on year, with a value of US$10bn (almost twice that of Hong Kong), these firms are clearly missing a large slice of the pie.
This leads me to a question:-
Is the preference of Japanese firms to use domestic brokers a “better the devil you know” reaction to the economic downturn, or have those brokers simply hired top talent from their foreign competitors to get to the top of the pile?
According to a recent article, ‘Asia-Pacific Financial Job Market Remains Steady’ by CFO Innovations Asia, it is anticipated that there will be an increase in recruitment activity in asset management, global custody and compliance areas for the second half of 2012.
Being a specialist recruiter in the asset management industry in Hong Kong, I have to admit that buy-side hiring seemed to be the least affected by the global financial turmoil, compared to the investment banks.
In the past six months, turnover has remained relatively high in the front office; multiple distribution/wholesale sales managers have been moving to competitors. Additionally, I have witnessed an increasing number of marketing and client servicing opportunities in the market. Although there are hidden openings here and there, the majority are critical replacements hires due to headcount limitations. From the conversations I have had with HR and management in fund houses, they do not foresee any expansion in the remaining two quarters of this year.
Besides the long-only asset managers, alternative investments with a particular focus in private equity and exchange-traded fund (ETF) seem to have picked up quite a bit. A number of US and China based PE funds are recruiting heavily from the investment banks, trying to take advantage of the influx of IBD professionals who are passionate to make a move to the buy-side.
For those who are not familiar with ETF, it is a security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. Given the volatility of the current market situation, investors have started to diversify their investments into ETF for their low costs, tax efficiency and stock-like features. In the past few months, a number of ETF providers have entered the market and there has been an increase in ETF sales, product development and portfolio management vacancies.
Hopefully the optimism in the asset management hiring market will be reflected across the rest of the financial services sector in the remainder of 2012.
I have elected to dedicate this blog to ignore the endless tide of negative press stories and to post some positive news to share with you.
On the recruitment front:
- In June we took on more new job mandates from employers that we work with across Asia than we have done for 18 months
- In June we also had more requests from employers to interview professionals than we have done for 12 months
- Last month, the US saw 163,000 new jobs created – far more than analysts were expecting.
On the business front:
- Mario Draghi pledges to do ‘whatever it takes’ to save Euro… At last, a positive statement of intent regarding a crisis/long series of lunches by European bureaucrats, which seems to have been going on for several eons
- China’s manufacturing Purchasing Managers Index (PMI) hit a five-month high of 49.5 in July
- Investors are pouring into South-East Asian stock markets, with bourses in Manila, Ho Chi Minh, Bangkok and Singapore all seeing double-digit rises this year
- Malaysia! Last month state oil company Petroliam Nasional Bhd (Petronas) announced the country’s largest ever outbound takeover. Add two very large (successful IPO’s), it now boasts three of the largest capital markets deals in Asia this year
- The Hang Seng index has increased 22% in value since October last year.
The bizarre, ridiculous and inspiring:
- In the US, ‘Pooh’ the Poodle saved her blind owners life, by smelling a gas leak and leading her out of her home
- In London, Dana Vollmer, beat the woman’s world record for the 100 meter butterfly on her way to Olympic gold. The fact that she overcome a potentially life threatening heart condition she was diagnosed with at the age of 15 en route to doing so is exactly the sort of thing Winnie the old British bulldog was talking about.
Prior to 2004, Greece was a relatively humble nation, particularly where football was concerned. Well known for its beautiful architecture, mythology, cheap holiday packages, terrible wine and tasty olives. By the end of Euro 2004 Greece stole the hearts of many football fans in tournament most will never forget.
The same can now be said about a nation that prior to 2011 wasn’t really taken much notice of by the financial world, barring its shipping industry. Now, they are at the forefront of most financial conversations.
Back to football, this year they somehow managed to get through the group stage, but were unfortunately knocked out by Germany on Saturday’s match. Did Greece let the Germans win? I do like the thought that such an event will help Germany to go easy on Greece after the two main pro bailout parties have won enough seats to form a coalition in the recent elections in Greece.
The New Democracy and Pasok parties along with the democratic left party are now in charge of renegotiating the terms of the bailout and deciding whether to exit the Euro. They have reportedly decided to stay in the Euro and honor the bailout agreement, although negotiations on the terms may occur, which seems to be a notion that has much rivalry from opposition leaders and much of the Greek public. If anything can be learned by the Greek national football team it is this, no matter what your history or your previous results it’s about moving forward, together as one to ensure that you succeed. This not only applies to the coalition government to work together but the country as a whole.
So the question is what’s next for Greece?