Investment banks in Hong Kong are hiring again, but are there enough bankers?
Recruitment companies say banks want to strengthen their technology, media and telecoms teams as they anticipate more tech listings in 2018
In 2015 and 2016 investment banks in Hong Kong were laying off staff, which was a problem for bankers and equally so for companies in the city that live off their largesse.
In 2017, the big investment banks started to think about growing, but the pace of hiring will really pick up this year, say analysts, as the banks hope that strong projections for economic growth in the region, especially in China, and regulatory changes in Hong Kong, will combine to drive increased revenues.
“It is the first time in at least the last four years that we have seen this level of optimism,” said John Mullally, who runs recruitment firm Robert Walters’ financial services practice in Hong Kong and Shenzhen.
“Normally this time of year would be a quiet one when it comes to hiring, but many of the banks are making plans now so that they can hit the ground running early next year.”
Mullally said that areas where he saw particularly strong demand for new hires were in banks’ investment banking divisions, particularly their TMT (technology media and telecoms) teams.
“They are also looking for Mandarin speakers, with about six to 10 years experience. The types of people who are able to look after a deal without much hand holding from senior management, but also are not that expensive,” he said.
The demand for TMT bankers was driven because of a number of high profile tech listings in Hong Kong in the latter half of 2017, such as online insurer ZhongAn Online Property & Casualty Insurance and online publisher China Literature.
It is a theme that will remain important in 2018.
“It’s a very exciting time for the Hong Kong market,” said Tucker Highfield, head of Credit Suisse’s equity capital markets syndicate in Asia-Pacific.
“2016 was a low water mark for ECM activity in Hong Kong, and until recently if people wanted to invest in technology in Hong Kong, there were only one or two options. However, this has now changed and investors have more options available to them, particularly with the recent IPOs in the fourth quarter, and the listings of Chinese technology companies that are likely to come in the future.
“The change of the rules around dual class shares, which is a significant development for the exchange, will only make this trend more pronounced.”
In December, the Hong Kong stock exchange announced new rules to allow companies to list with two classes of shares, some with more voting rights than others.
Carlson Tong Ka-shing, chairman of Securities and Futures Commission, Hong Kong’s securities regulator, said that following the rule change he hoped at least one giant tech name would list in the city in 2018.
Technology companies like Ant Financial, Alibaba Group Holding’s finance business, Ping An Insurance (Group)’s online wealth management and lending platform Lufax, and smartphone maker Xiaomi are all potentially going to list next year, though which bourse they will choose remains up for grabs. Alibaba owns South China Morning Post.
More positive sentiment is also expected when it comes to mergers and acquisitions transactions, which were hard hit in the first half of last year by tighter rules on the mainland about outbound investment.
Nor are banks only looking to hire deal makers. J.P. Morgan for example, said it boosted its Greater China equity research team by 20 per cent last year, and is hoping to grow by a further 30 - 40 per cent this year, and further still in 2019.
“We are looking at significant levels of hiring,” said James Sullivan, head of Asia ex Japan equity research at J.P. Morgan. “We are seeing an expanding interest in the A-share market on the back of MSCI inclusion, as well as the overall maturation of the market.”
“We have seen a significant shift in terms of investors’ interest in the A-share market in the last 12 to 18 months. The view on onshore Chinese shares has shifted from “a very high-risk market” to one where large institutional investors see holdings as central to their China exposure on a long-term basis.”
This optimism is a marked change from attitudes 15 months ago.
In September 2016, Goldman Sachs laid of nearly 30 per cent of its investment banking staff in Hong Kong, according to media reports at the time. They were not alone, other investment banks hired more slowly, laid staff off, and, and in some cases withdrew from the region altogether.
However, the long period of quiet when it comes to hiring is causing difficulties now.
“The problem with trying to hire bankers with coming up to about 10 years of experience is that the global financial crisis was 10 years ago, and so as banks cut back on hiring then, there are fewer people in that cohort than in others.”
Besides, there is more competition now.
“In the past hiring in financial services was all about the big international names, however this has now changed,” said Richie Holliday, chief operations officer for Asia-Pacific at recruiter Morgan McKinley.
“Now the big mainland names are at least as important when it comes to recruitment.”
Nor do banks only have to worry about other banks when it comes to hiring.
“Also, for bankers with a technology focus, there is a trend towards people leaving banks to take up roles in the finance divisions of the big tech companies, many of whom can offer a more attractive working environment,” said Mullally.