New talent is increasingly hard to come by in high profile sectors of Hong Kong’s economy – particularly the all-important financial industry. HK has long been a haven for expat bankers, but COVID-related travel restrictions and the special administrative region’s growing political shift toward mainland China has dented that appeal. A drawdown in equity market valuations and souring IPO conditions have forced some Hong Kong banks to begin cutting jobs across multiple divisions.
There have been rumors that Hong Kong will begin cutting down on quarantine requirements in the near future, but similar emerging market financial hubs like Singapore have already eliminated nearly all restrictions. Hong Kong-listed firms have managed to outperform equities of most other EM economies so far this year, but its taken a decade-high in buybacks to make it happen.
Related ETFs: iShares MSCI Hong Kong ETF (EWH), iShares MSCI Emerging Markets ex China ETF (EMXC)
It was November 2021 when MRP first noted that Hong Kong’s strict COVID-19 policies could be damaging its status as a booming Asian financial hub. Per Reuters, the Asia Securities Industry and Financial Markets Association (ASIFMA) said a survey of members, including some of the world’s largest banks and asset managers, showed 48% were contemplating moving staff or functions away from Hong Kong due to operational challenges.
A top issue for the finance industry in Hong Kong is a growing drought of new talent. Per Bloomberg, global recruitment firm Ambition has reported a 40% decline in candidates for entry-level positions in finance and law, compared to before the pandemic. Further substantiating that data, Recruitment agency Morgan McKinley said it has seen a 60% drop-off in interest across entry-level to experienced hires in Hong Kong, on a rolling six-month basis to the end of June.
Job cuts initiated last month have continued to bite HK’s appeal for young bankers. The Financial Times notes several big Chinese investment banks in the city, including Haitong International and China Merchants Bank International, have reduced staffing in their investment and equity capital divisions as equity valuations tumble and the IPO market slumps. PwC has projected a full-year drop of about 40% for total fundraising volume by The Stock Exchange of Hong Kong (HKEX).
Asia Times notes the financial services industry is the backbone of Hong Kong’s economy, accounting for more than 23% of the local GDP.
It’s not just young people or middle management beginning to shift their plans away from the city; some of the most established members of the city’s economy are preparing an exit. The latest data from Consultancy Henley & Partners, highlighted by MRP in June, predicts that 10,000 high-net-worth individuals will leave mainland China and 3,000 will depart Hong Kong this year, taking with them combined wealth of up to $65 billion. Per CNBC, Hong Kong lost 93,000 residents in 2020, followed by another 23,000 in 2021.
Unsurprisingly, a leading cause for this exodus continues to be heavily restrictive COVID policies, particularly those that…
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