When China's regulators decided to suspend domestic IPOs earlier this month, it seemed like good news for the Chinese bankers looking for a few quiet months over the summer. At first there was little concern about job security, but as the suspension continues people are starting to ask exactly what China's equity capital markets (ECM) bankers are up to.
They assure us that they're busy.
"In China's domestic securities firms, there is no banker who solely does IPOs," says one senior executive director at a local securities firm, who asked not to be named. "If they do, they are going to starve."
Even if IPOs aren't happening, the executive director says ECM bankers are busy: "An IPO involves a lot of preparatory paperwork as well as reporting and reviewing. This is still happening despite the [IPO] suspension."
Stephen He, a Shanghai-based partner of the recruiting firm Falcon Talent, shares a similar observation. "There are many other projects going on right now, such as re-privatizations and private placements. These securities firms are not sitting idle."
According to China Securities Regulatory Commission (CSRC), the regulatory body of China's domestic stock market, there were 569 companies waiting to be vetted in the pipeline as of 2nd July 2015. "This is a huge number which might take the market one or two years to digest," says another veteran Chinese investment banker who also asked to be anonymous. "I'm not too worried about the bankers' jobs in local securities firms."
In fact, only 38 companies' IPOs have been affected by the suspension, a tiny proportion of the pipeline. While the suspension is clearly bad news for those who are involved in these IPOs, the rest of the market is carrying on as usual.
"People are working hard to get new businesses now," says the anonymous banker.
Bloomberg suggests that about US$386 million in fees are at stake as a result of the halt of the 38 companies' IPOs. Without these fees, bonuses for bankers involved in those deals are almost certain to be reduced. "They must be very concerned, particularly bankers in some smaller securities firms," claims Alina Yang, a consultant at Shanghai Cornerstone Global Partners, a search firm, "If they don't get a successful IPO, they won't get a bonus."
The good news is that many securities firms had an excellent first half before the market slumped. This may help mitigate the slow second half.
"Some local bankers were expecting a 2015 bonus twice as much as 2014, but now I don't think they can get that much," says Jennifer Yuan, a Beijing-based consultant from the search firm Signature Search. "My estimation is that they might now get similar amount to last year, " she adds.