Once high-flying bankers in Hong Kong become a lost generation

 

WHEN Eric Li lost his job after his family-office employer relocated away from Hong Kong, he knew he would be facing a tough job market. He had no idea how hard it would be.

Seventeen months on, Li is still searching. The bills are piling up – nearly HK$60,000 (S$10,360) a month for rent and HK$1 million annually for his kids’ education. The worst part though is the fear, and gradual acceptance, that this is not even rock bottom.

Just five years ago, finance industry professionals with Chinese expertise like Li were sought after by firms from UBS Group to Citigroup. Initial public offerings (IPOs) by companies such as Xiaomi and Meituan bolstered Hong Kong’s status as a financial nexus rivalling New York. Their efforts helped to generate more than US$6 trillion in market value of mainland Chinese firms listed in Hong Kong and the US.

Now US-China geopolitical tensions have fractured capital markets. Hong Kong IPOs have dried up as stock prices slump and economic prospects wane. President Xi Jinping’s push to step up data security and financial market regulation has made it harder for Chinese companies to acquire assets or list overseas.

“I thought that China’s upward trajectory and the tighter ties between domestic and global financial markets was a norm – now I realise it might have been just a blip,” said Li, who has also worked at Citigroup. “That is a scary thought.”

Nowhere is that pain more pronounced than in Hong Kong, the centre of such deal brokering. The damage is underscored by the barrage of layoffs by Wall Street firms, the retreat of global capital into the world’s second-largest economy, and the city’s diminishing role as an international financial centre.

The number of non-entry-level finance workers looking for jobs in Hong Kong is “in the hundreds”, based on the applicants who work with recruitment executive John Mullally.

“It is a fragile enough market,” said Mullally, managing director at Robert Walters. “There are more cuts to come.”

Goldman Sachs Group, JPMorgan Chase & Co and Citigroup have made several rounds of job reductions in Asia over the past 18 months.

One banker who was made redundant by Goldman Sachs said it led her and her peers to evaluate whether to stay in Hong Kong – and even the industry. The drop in IPOs flowing from China means banks will need to consider restructuring across Asia because staff numbers that have risen through past hiring are no longer justified, she said.

Another took it a step further. After losing her job as an analyst at a global investment bank last year, Yang, 24, spent months searching for work, lining up about 10 interviews at consulting, venture capital and private equity firms, without success. With her HK$20,000 a month lease coming up, she decided to move back to the mainland to live with her parents and pursue a career outside of traditional finance.

“The competition is a lot more fierce than before,” said Yang, who like others quoted for this article asked not to give her full name speaking about sensitive career matters. “If you have one private equity job in the market, there will be hundreds of ex-bankers’ resumes flying through.”

The number of people licensed with the Hong Kong Securities and Futures Commission, a reflection of the number of finance professionals in the city, dropped more than 600 since the end of 2021, to 44,722 as of December.

Slowing financial services activity is likely to weigh on Hong Kong’s economy, given that the industry accounted for about 23 per cent of gross domestic product and 7.5 per cent of employment in 2022. The city’s post-Covid recovery undershot expectations last year, and Bloomberg Economics estimates that GDP growth will slow to 1.8 per cent this year from 3.2 per cent in 2023.

IPO fundraising in Hong Kong fell by 56 per cent last year to HK$46 billion, the least since the dotcom bubble burst more than two decades earlier, according to data compiled by Bloomberg. The number of listings slid by nearly a fifth to 67, and only 13 raised more than HK$1 billion, the data show.

Private equity and venture capital investors have also been hit. The money raised by China-focused dollar funds plummeted 81 per cent last year compared with 2021, according to Preqin.

China-focused bankers have borne the brunt, spanning both sell- and buy-side. Investor relations managers were also badly affected because their skills were less transferable, said Charlene Yeung, executive director at recruiting firm Wellesley, which specialises in senior hiring.

“It’s grim for sentiment,” said Yeung. “This year looks like, and hopefully is, the rock bottom.”

Bankers should brace for a minimum 20 per cent drop in compensation, and in some cases the reduction “can be very extreme”, she added.

The latest round of job cuts that came right before the Chinese New Year focused disproportionately on managing directors and those one level below, Mullally said.

After looking at former colleagues who have been out of a job for more than a year, Henry, a debt banker working for a Chinese brokerage in Hong Kong, said even if his pay gets cut by 30 to 40 per cent he would accept it.

“I’m worried I’m gonna get fired any day,” he said. “All our revenue drivers are paralysed.”

The gloom is prompting some bankers to make lifestyle adjustments, trim expenses and even re-evaluate their self-worth.

An executive director surnamed Wang said her friends described her as “looking grey” for the whole of last year as her spirit sank after getting few IPO deals despite working overtime every day. She said it felt like her career was over prematurely “with the end of an era”. Even as she looks at opportunities in Dubai and Singapore, she wonders what value she can add.

Age is working against some, particularly those who return to the mainland after being laid off in Hong Kong.

“The unfortunate reality is that at their level, they may be considered too old for the markets, especially in southern China cities,” said Shenzhen-based Sihui Lei, associate director at Robert Walters China.

China’s economic and market malaise and a backlash against the financial industry is also making it tougher to relocate to the mainland.

Not everyone is convinced that the best days are over. Jonathan Slone, former chief executive officer of brokerage CLSA, says booms and busts have been an expected part of living in Hong Kong.

“Yes, the froth of the most recent bull market is gone for now,” Slone wrote in a recent Financial Times column. “But Hong Kong will not only survive, but thrive as it always has.”

His opinion was echoed by another former managing director at an international bank, who said it was irrational to conclude that the downturn was structural instead of cyclical. Now advising finance students, she tells them to toughen up and realise that dealing with market chaos is part of the job.

To stem a population decline, the government has introduced a talent pass luring more people to the city. About 59,000 such permits have been approved as of the end of February. The population rose 0.4 per cent last year.

Still, the sea change means some people will never see the world the same again.

“In the past, I thought I was talented, top of my game. Now I know it was guo yun,” the job searcher Li said, evoking a phrase gaining traction that loosely translates to the fortunes of a country. “Without guo yun you’re nothing.”