Morgan Stanley highlights the new hot area in Hong Kong banking

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Twilight of Victoria Harbour, Hong Kong

Do you work for a global bank in Hong Kong? The future of your job is increasingly being decided not by your firm’s head office in the US or Europe…but by the Chinese government. And as a result, the future is not necessarily that bright if you want to remain in city.

As China liberalises its securities market, Western banks are growing their China research teams, but their hiring is shifting from Hong Kong to the mainland. Similarly, following Beijing’s landmark decision in November to allow foreign banks majority stakes in mainland securities joint ventures, Morgan Stanley, Goldman Sachs, Citigroup and Credit Suisse may soon refocus the hiring plans of their markets businesses toward China. And even though China is encouraging more mainland companies to list in Hong Kong, global banks there are missing out on these deals to their Chinese counterparts.

Not all policy developments emanating from the mainland will negatively affect staff at global banks in Hong Kong, however.

China’s Belt and Road (B&R) global infrastructure initiative, which was added to the Communist Party constitution in October, is a case in point. In a recent research note, Morgan Stanley analysts Kevin Luo and Jenny Zheng estimate that investment into the 60-plus countries along the trade route – which connects Asia to Europe – will grow at an annual pace of 14% from 2018 to 2020, compared with a reduction of 1.6% in 2016 and 2017.

Good news for the Belt and Road generally means good news global banks, whose participation is considered crucial to the initiative’s success. They have better cross-border expertise – within infrastructure finance and M&A, for example – and better international reach than their Chinese competitors, and are well placed to help Chinese companies expand within the B&R zone.

Although B&R projects are likely to see some bankers deployed in-country (Citi is already hiring 25 people outside of Greater China in response to the trade programme), Hong Kong is home to most of Asia’s cross-border talent. Hiring linked to B&R in investment banking, infrastructure finance, project finance and trade finance is likely to pick up in Hong Kong over the next year, says a headhunter in the city.

“Because the very local businesses in the Chinese domestic market are well covered by the local banks, our biggest value to clients is often benefiting from our global network,” Gerald Keefe, Citi’s head of corporate banking in Asia Pacific, said in September, in relation to B&R.

Chinese banks are still priming themselves for more B&R work, though, and are likely to try to poach from Western firms when they can. As we reported in September, ICBC hired Andrew Lee from Mizuho as a director covering structured finance for international clients. His is focused on “large event-driven financing” for the Belt and Road.

Image credit: EarnestTse, Getty

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