Global banks may soon locate more equities jobs in China rather than Hong Kong as they increase their coverage of mainland stocks, say industry experts.
Citi announced early this month, without providing details, that it is considering establishing an onshore cash equities business in China.
Other Western banks are likely to hire equities staff in China within the next 12 to 24 months as they look to take further advantage of stock connect programmes that allow two-way trading between the Hong Kong and Shanghai and Shenzhen markets, says Hugo Cheng, a consultant at financial services consultancy Quinlan & Associates.
Most China-coverage staff are currently based offshore in Hong Kong, although firms including Credit Suisse, Goldman Sachs and UBS have small teams in China.
“While many foreign banks are already servicing Hong Kong clients interested in China A-shares, they’re less able to service the booming domestic Chinese client base without an onshore presence,” says Cheng. “It’s now becoming increasingly clear that this presence is needed.”
Citi is increasing its coverage of Chinese companies from 175 to 200 by the end of this year, and to 250 in the longer term.
Rising demand for brokerage and research services is also being fuelled by index publisher MSCI’s decision earlier this year to include China-listed shares in its emerging-markets benchmark.
“That was a huge milestone to attract international funds into China,” says Stanley Soh, a Hong Kong-based regional country director of financial services solutions in Asia. “Banks with a Chinese joint venture partner or onshore operations will definitely build up their onshore equities units to tap the trend of China becoming a much stronger equity market.”
Cheng expects foreign banks to focus their hiring on research jobs. “The global players have a competitive edge in research, given their breadth of coverage. Sales and trading jobs will also be created to build on-the-ground relationships and to execute trades,” he adds.
Hiring equities staff in China is likely to be challenging, though. “Chinese banks tend to have different approaches from the Western banks, given their historic focus on the retail space,” says Chen. “Foreign banks will want people to provide more sophisticated research, in line with their global style – these skills are scarcer in China.”
The equities talent pool in China is “shallow”, so banks will need to recruit international candidates as well as local ones, says Matthew Hoyle, a trader-turned-headhunter in Hong Kong.
Hong Kong-based equities professionals who lost their jobs during recent redundancies – Barclays and Standard Chartered, for example, have shuttered their Asian equities operations – may see moving to China as a way back into the sector.
“There’s potential to move employees from Hong Kong and Singapore to China to fill the talent gap, and some will be open to the idea,” says Chen. “But there are still major issues around higher taxes, cultural issues, and generally lower compensation.”
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