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End of the ECM party?

It was all going so well: booming Chinese IPOs were expected to feed demand for equity capital markets bankers. Suddenly the future’s less certain.

Until markets gyrated last week, there were reasons to think 2008 might be a boom year for jobs in China’s equity capital markets (ECM) businesses.

According to a report from PricewaterhouseCoopers, the total IPO funds raised on the Shanghai and Shenzhen exchanges last year amounted to Rmb477.1bn (US$65.7bn). And many China flotations did so well – shares in China Construction Bank (CCB), for example, rose more than 50% after listing on Shanghai in September – that even more frenzied activity appeared likely.

Collapsing markets are unlikely to dissuade banks from their long-term plans for Chinese expansion. However, combined with the fact that fewer large state-owned enterprises are expected to float this year, they may now grow a little more slowly.

“Despite the solid [IPO] pipeline of most banks, we expect them to be more cautious and focus on hiring the best talents rather than ramping up the team as in the last year,” says Matthew Hoyle, partner at search firm Matthew Hoyle International.

Ivy Ng, partner at search firm Korn/Ferry International, describes hiring in ECM as “steady”, with demand at director and VP levels.

“Foreigners fill the more senior positions, and positions below director are filled by locals or Chinese speakers,” she says. Basic salaries for directors range between US$200k and US$250k, while VPs’ pay ranges between US$150k and US$180k – plus a bonus.

Hoyle says demand is stronger in areas of origination, and for experts in convertible bonds and other hybrid products. Experienced candidates can expect salary plus bonus packages of US$500k and up.

Foreign banks are still eager to pour money into China, however. International banks like Morgan Stanley, JPMorgan and Credit Suisse are looking to set up joint ventures in the country after Beijing agreed to start licensing foreign joint ventures again. JPMorgan says it’s already in talks with a few Chinese brokerages, and Credit Suisse has revealed plans to take a 33.3% stake in a joint venture with Founder Securities Co.

Last year China’s restricted A share market was dominated by the likes of China International Capital Co., UBS, CITIC, Morgan Stanley and Goldman Sachs, which raised a combined 59% of total issues, according to a report by Thompson Financial.

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