As Chinese companies dominate new listing in Hong Kong, more rank-and-file ECM bankers in the city are vying to join the mainland banks that are underwriting these deals, say headhunters.
“There’s now an increased willingness by ECM bankers from bulge bracket firms to move to Chinese banks,” says Yvette Kwan, a former APAC investment banking COO at UBS, now a partner at Hong Kong finance consultancy Quinlan & Associates.
“About 10 to 15 Hong Kong-based ECM bankers – locals, mainlanders and others – call us each month over the past year looking to join a Chinese securities house, even for a reduced salary, just to secure a job in their field,” says Jason Tan, an investment banking headhunter.
Lead by top-ranked CICC, half of the banks in Dealogic's Asian IPO year-to-date revenue table are Chinese. “Mainland banks are winning more IPOs in Hong Kong because they already have strong relationships with the Chinese private companies that are increasingly dominating new listings here,” says Hong Kong finance professional Matt Huang, author of the book Young China Hand. While some Western corporates have listed in Hong Kong in the past – Samsonite in 2011, for example – few do so now.
Chinese banks have also landed Hong Kong IPOs by offering fees as low as 1%, well below the rates of their global rivals. “Chinese banks, like many other Chinese organisations, have always use pricing to win deals,” says Tan. “Call them price butchers if you like.”
But mainland banks aren’t hiring “superstar” MDs from the likes of J.P. Morgan and Goldman Sachs, says Tan. “They’re winning deals with low fees, so they can’t justify spending millions on senior people from Western banks.”
The ECM jobs they have on offer are largely at the junior to mid level. “Due to their extensive corporate banking networks, Chinese banks already have a strong deal pipeline to originate Chinese issuers suitable for IPOs” says Stanley Soh, a Hong Kong-based regional country director of financial services solutions in Asia. “So they need strong IPO execution bankers to lead and enhance the overall execution experience.”
“Their big pipeline also makes them great training grounds for junior bankers to work on a variety of different IPO deals,” adds Soh.
If you leave a Western bank to join an ECM team at a Chinese bank in Hong Kong, expect your base salary to fall between 10% and 30%. “But in the current market your bonus may make up the differential due to the higher volume of IPO deals Chinese banks are now involved in,” says Soh.
Meanwhile, ECM specialists in Hong Kong who want to remain within global banks are having to “reinvent themselves”, says former UBS COO Kwan. “The traditional China-focused ECM banker within Western banks is in decline, so some are expanding their coverage to other countries, or expanding their scope into other products, like DCM,” she says.
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