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What’s going to be up and what’s going to be down in 2008? eFinancialCareers gets out its crystal ball.
2008 will be a good year for…
Localisation
While Singapore and Hong Kong are unlikely to lose their status as key hubs any time soon, we will see much more localised activity during 2008, predicts John Wright, chief executive at Global Sage.
“I think we’ll see growth in local markets, with businesses looking to secure banking licences in places such as Taiwan, Seoul, Shanghai, Mumbai, Jakarta and even Vietnam, particularly in areas such as currency and debt. There will be a lot of hiring, especially on the operations side,” he says.
“We expect to see a continued appetite for banks to re-locate back-office support functions from national markets to growing Asian economies,” agrees Richie Holliday, managing director of Morgan McKinley Hong Kong.
Hedge funds
The growing popularity of China for investors fuelled growth within Hong Kong’s hedge fund industry in 2007, and this shows no sign of ebbing in 2008, the Hong Kong Securities & Futures Commission has said.
Within Singapore the presence of two big state-backed investment firms, Temasek Holdings and Government of Singapore Investment Corp., continues to make it a prime destination for hedge funds, with the city’s Chinatown area the most popular location in which to set up shop.
Successful hedge funds in the region may well look to expand into new areas, argues Global Sage’s Wright, such as private convertible issues, private equity transactions, distressed loan purchases. “I think those teams will be being built up quite heavily.”
Risk management and operations
From the hiring perspective, risk management is set to be a major growth area in 2008, argues Morgan McKinley’s Singapore country head Jeremy Canning.
“Banks will be taking a more in-depth look at the risks they and their clients are seeking to take on in 2008. We should see a much greater emphasis on credit risk management as banks attempt to avoid further losses and protect their profitability. Consequently, hiring in this area is likely to rise during 2008,” he says.
According to recruiter Options Group, in its forecasts for 2008, risk managers at hedge funds and bank prop desks are in particular demand, with some receiving 30% pay bumps and equity participation to change firms.
Banks and others that found themselves exposed to major write-downs during the second half of last year will be particularly keen to bring in talent in this area, agrees MM’s Holliday. “Risk management will be a key area of growth for businesses in 2008,” he says.
Separately, banks like BNP Paribas, Lehman Brothers, Barclays Capital, Merrill Lynch and Royal Bank of Scotland are expected to hire large numbers of back-office staff in 2008 as they continue to hub operations in Singapore.
Commodities
Commodities are going to be a key profit driver for fixed income desks during 2008, argues Options Group. Rapid rises in the price of oil, copper and other raw materials saw demand for talented traders rise during the latter half of 2007, a red-hot hiring situation that is likely to continue into 2008.
“Commodities, particularly agricultural commodities, will experience healthy growth in 2008 which will boost hiring in this sector,” agrees Morgan McKinley’s Holliday.
“The temptation to invest in safer stocks in this field should see precious metals continue their 2007 trends and rise steadily,” he adds.
And 2008 will be a bad year for…
M&A
Options Group argues M&A activity in the first half of 2008 will be unable to match 2007′s first-half record performance. “Distressed debt, restructuring and technology M&A will become larger revenue streams for global investment banks in 2008,” it says.
Others, however, are much more optimistic. Credit Suisse, for one, has said it plans to increase its investment banking headcount in Asia-Pacific by at least 26% next year, partly on the back of demand for takeover and M&A advice, as well as sales of stocks and bonds.
And KPMG in Australia has predicted that 2008 will be another strong year for M&A, although there may yet be an effect from the tightening credit market.
Indian talent
Continuing explosive growth in India is making it harder for Asian-based banks to hang on to their Indian talent in areas such as corporate finance, cash equity markets and treasury.
The growth of a wealthy middle class in India is also fuelling demand for private banking and wealth management, suggests Christian Sulger Buel of Sulger Buel & Co.
“There are therefore more banking and investment requirements. The challenge is how to import or bring back either people of Indian origin or Indian nationals,” he says.
This is a particular challenge because it comes at the same time as Singapore is looking to double its private banker numbers, he adds.
Japan
Whether it’s mild or severe, economists are predicting Japan will tip into recession in 2008. Morgan Stanley has forecast zero growth in 2008, with changes to the country’s regulations making it much harder for smaller businesses to obtain credit. And Lehman Brothers has predicted it could take the country two years to return to “normalcy”.
One bright side of this is that it may mean there is more appetite among Japanese banks to offshore some of their finance through joint ventures with financial institutions elsewhere in Asia, argues Global Sage’s Wright.
Air quality
The Hong Kong government has announced that income tax levels will fall in 2008, says Morgan McKinley’s Holliday, which is, of course, a positive when it comes to recruitment. “It is a very good incentive to attract overseas talent,” he says.
But at the same time, industrial and manufacturing growth in the region means air pollution is worsening and, in Singapore, traffic congestion is becoming a growing irritation, despite increased road charging, adds MM’s Canning.
“Higher levels of wealth creation, immigration and slightly lower car costs mean more individuals now own cars and are putting them on the road,” he says.
The eFinancialCareers editorial team is taking a protracted Christmas break. We will be back in full force on January 8th. Happy New Year!
For 2008, we probably see lower US sales orders from the EMS market, as USD continues to drop as compared to the 1.5 trillion USD deposits in China. Properties and stock indices will continue to rise modestly amidst Chinese Govt. monetary controls. The Chinese Bubble will not burst, like the Japanese in 1990s. We will see moderate growth with lots of Central Chinese Govt. interventions and curbs via monetary policies e.g. interest rates. We will also see more Chinese investments in US and other European countries e.g. purchase of buildings and enterprises.
Major Chinese Cities to look at for potential growths are: Beijing, Shanghai, Douguan, Chengdu and Chongqing – mainly in the service and property related business.
The Olympics will hasten growth in China, and at the same time bring increasing costs of manufacturing in China, especially in the EMS market. We will see increasing Chinese revenues from Hotels, service and related industries.
Energy, water, food, environment will still be major costs issues in China. Costs of living in China will continue to increase and the income disparities will continue to worsen.Well at least, China can still look forward to Shanghai Expo2010