The jobs rout in Hong Kong equities should be over by now – but it shows no sign of stopping.
However, there are now fears of new job losses during the second half of this year, a time when banks typically refrain from making many redundancies.
“Despite the first-half cuts, I think most equities desks in Hong Kong are still dramatically overstaffed,” says Matthew Hoyle, a former options trader who now runs Hong Kong headhunters Matthew Hoyle Financial Markets. “We’re not at the bottom of the cycle yet unfortunately.”
“I expect to see more equity trading cuts at banks like BAML, BNP, Goldman Sachs and Nomura,” says a headhunter in Hong Kong who asked not to be named. “People there know what’s coming – we’re already seeing quite a lot of CVs from these shops.”
This year has been a “perfect storm” for equity markets in Greater China, adds Nikolas Cleverley, an ex-Barclays futures executive, now a senior consultant at search firm Carraway Group in Hong Kong. “China’s slowdown after last year’s bull run, Brexit, the US elections and EU debt issues have caused equity trading to drop significantly,” he says.
Most international banks have experienced a slump in Asian equities incomes as a result. Equities revenue at UBS, for example, fell 22% globally year-on-year in the second quarter, while its income from equity capital markets (ECM) dropped 42%. The Swiss firm partly blamed a slowdown in Asian trading for the declines.
Banks also axing in ECM in Hong Kong
While most of the upcoming Hong Kong job cuts are likely to affect equities sales and trading teams, the lay offs could also hit ECM, say recruiters.
“Most front-office areas are experiencing some level of layoffs, but ECM is among the most affected,” says John Mullally, director of financial services at recruiters Robert Walters in Hong Kong. “Further cuts are expected in the second half, although it’s not yet certain how widespread they will be.”
New listing volume in China was $13.7bn in the first half of this year, less than a third of the amount raised in same period in 2015 ($41.2bn), according to Dealogic figures.
Deutsche Bank and Morgan Stanley were the only two foreign firms in the top-10 for Chinese ECM revenues during the six months to end-June.
“ECM recruitment at global banks in Hong Kong is down from last year and the outlook doesn’t look particularly strong,” says Mullally. “It’s not just because of Chinese banks taking market share – the major issue, as it has been for the last nine months, is a challenging marketing and economic environment.”
Global banks may wait until later in the second half – when their IPO pipelines become clearer – to announce redundancies, says Sandeep Mohanan, a senior consultant in banking and financial services at recruitment agency Morgan McKinley in Hong Kong. He says layoffs won’t be “in mass numbers” and will mainly target “directors who don’t originate business”.
The dangers of over-cutting
Cleverley from Carraway Group says global banks in Hong Kong risk having to rehire next year if they trim too many bankers and traders over the next few months.
“My feeling is that once the US election is over the markets will pick up, and if China starts to print money in Q4 that will also help,” says Cleverley. “Teams are overstaffed now, but if things improved they would be at about the right level.”