Around this time last year, we were reporting on gloomy 2017 bonuses for people working in Asian equities jobs. Now the outlook for 2018 bonuses in the sector appears even worse, if UBS’s fourth quarter financial results are anything to go by.
Equities-trading revenue decreased 13% to $792m year on year at UBS in Q4. While UBS’s earnings report doesn’t provide regional figures for equities, the firm’s CFO, Kirt Gardner, was quick to lay much of the blame for the fall on Asia.
On a product basis, the sharpest drop in equities revenue at UBS was in derivatives, Gardner said on an analyst call, adding that structured products had become “less attractive” due to increased levels of market correlation in Q4. “And that was very, very pronounced in Asia Pacific where we tend to have a disproportionate share of that business versus our peers,” he said. “And so, as you might expect, we therefore also on a regional basis saw a sharp drop in Asia that impacted our overall equity result.”
This does not bode well for the bonuses of equities staff at UBS in Hong Kong – but they are not alone, say recruiters. Asian equities traders across global banks in the city will likely see their 2018 bonuses fall by about 10% compared with the previous year, says Eunice Ng, director of headhunters Avanza Consulting in Hong Kong. “Trading bonuses typically track the market,” adds John Mullally, director of Hong Kong financial services at recruiters Robert Walters in Hong Kong.
Therein lies the rub. Fuelled by US-China trade tensions, the Shanghai Composite Index ended 2018 25% below where it started, making it the worst-performing major stock market in the world, reports Bloomberg. This was despite the inclusion of mainland-listed stocks into the flagship MSCI Emerging Markets index last year. Hong Kong’s Hang Seng Index has also been on the slide since January 2018. Back in October, UBS warned investors of continued volatility following a broad-based sell-off in Asian equities at the start of Q4.
Still, it doesn’t appear that Asian equities roles are on the line at UBS, despite several other banks – most notably Deutsche Bank, Credit Suisse, and Barclays – culling jobs in the function over the past two years. “I am comfortable there is nothing strategic or structural we should look into for the future,” UBS CEO Sergio Ermotti told analysts, referring primarily to equities client activity at his bank being skewed toward Asia.
Separately, as we reported yesterday, UBS's Q4 results also reveal a surge in front-office hiring within its Asian private bank.
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