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Why BoAML, Daiwa and others have held back on Asian job cuts until now, despite markets being rubbish for ages

Axe man

The third quarter in Asia is ending on a string of banking redundancies, with Hong Kong-based sales and trading roles, especially equities ones, bearing the brunt. Just this week Bank of America Merrill Lynch axed up to 40 people from its global markets unit and Daiwa Securities slashed about 50 derivatives jobs in Hong Kong. Nomura and Deutsche Bank have also been trimming.

Poor stock- and derivatives-trading volumes are the underlying causes, but they don’t completely explain the timing. After all, markets have been rubbish for ages and these job cuts could have been justified and executed earlier, as was the case at RBS, Macquarie and CLSA. But banks have reasons for holding back.

Decisions makers have only recently returned from a longer and less active summer break than usual and their hands have now been forced by a lack of recovery in the markets. By contrast, when the year began there was a “lot of hype” that markets would start picking up in the second half, so some firms didn’t rush their retrenchments, says Warwick Pearmund, executive director, banking and finance practice, Asia Executive Talents. Banks’ optimism about Asia compared other regions also helped to delay redundancies, adds Damian Babis, director, Capital People.

Bonuses are a factor, too. Because falling profits have diminished their bonus pools, firms want to make sure their top performers receive the bulk of what’s left. Cutting underachievers now, before bonuses are due, leaves more money in the pot. And when hiring decisions are made for next year, it also frees up headcount costs for business units that are expected to be profitable, says Babis.

All this has been exacerbated by the move to electronic trading and the resulting decline in commission rates for investment banks. “In equities, the business model has fundamentally changed. Low-touch trading, which is less staff-heavy, has replaced high-touch trading,” says Pearmund.

A new role is not likely

If you’ve just lost your trading job in Hong Kong, don’t expect many calls from headhunters. Babis describes the employment market as “terrible”, unless you have a “demonstrable track record that is clearly repeatable in a standalone environment – ie a ceded hedge fund”.

A Hong Kong recruiter who asked not to be named adds: “I’d recommend they go to a nice beach somewhere in Thailand and try again next year. It’s nigh on impossible to find a new role. The trading positions I have on now are product, language or cultural specific. It’s a buyers’ market.”

Some former bulge-bracket traders in Hong Kong have moved to execution-only firms like BTIG, says the anonymous recruiter. “But only to keep in the market; most would go straight back to a big firm if given half the chance.”

These employers typically pay on a draw-down basis. “If you’re profitable, you make money; if you don’t, you’re out. It works for some but not for others.”

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