China's stock market is unusually skewed towards individual investors without much capital markets knowledge. With stocks down around 30% in the past three weeks, these individual investors have been burned. They're not the only ones: Chinese bankers have lost their own money too.
"I went into the market when it dropped to about 4,200, thinking that I might have made a beautiful cut at the bottom," says a senior VP at a major Chinese securities firm, speaking anonymously. "Who would have anticipated that it would have then dropped even further to 3,600?"
In theory, China's bankers should be more savvy investors than the man on the street. In reality, many are still young. - Maybe too young to appreciate the crash of 2007-2008.
Unlike young bankers in the West, many of whom lost their jobs during the financial crisis, most of the Chinese bankers we spoke to were at least sanguine about their job security. Even though the curb on IPOs for the foreseeable future would seem to threaten the jobs of equity capital markets bankers, researchers and even traders, bankers in Shanghai are unconcerned. "It's simply not something to worry about," says one anonymous banker.
It helps that the Chinese government is doing its utmost to reverse the slump. It helps too that most Chinese banks and securities firms are state owned and therefore not prone to making people redundant. Cutting staff now would also become a political issue and could compound the problem.
If job security is not an issue, pay is. One A share equity analyst at a major brokerage reckons that if the bear market continues like this, she will face a pay cut. "The cut could be as worse as 30 to 50%," she says.
Normally a pay cut of this scale would lead to people leaving for new opportunities, but things might be tricky this time. "Many deals are pending now," says Alina Yang, a consultant at Shanghai Cornerstone Global Partners, a search firm, adding that employers and employees are both pausing at the moment, hoping to get a better idea as where the market is heading to before making a decision about hiring.
"Deals have slowed down a lot," she says.