Several major Chinese investment banks in Hong Kong, including Haitong International and China Merchants Bank International, have downsized their investment and equity divisions to cut costs during the city’s IPO drought, according to bankers.
Chinese investment banks expanded their presence in Hong Kong last year amid strong demand for secondary listings of US-listed Chinese companies after new cybersecurity rules instituted by Beijing halted lucrative tech IPOs previously aimed at New York.
But the number of public listings in Hong Kong fell sharply in the first quarter of 2022 from last year’s record due to strict pandemic lockdowns, rising geopolitical tensions between the United States and China and Beijing’s regulatory assault on the tech sector.
Haitong International, one of the main Chinese bookrunners in Hong Kong last year, has made a series of layoffs across all departments in recent weeks, while China Merchants Bank International, another brokerage based in Hong Kong, fired about 10 investment banks. staff last month, two people familiar with the matter said.
Guotai Junan International, the Hong Kong arm of mainland investment banking group Guotai Junan Securities, fired several of its bond and IPO managers in early June, the second person said.
Some bond finance bankers have been transferred to equity research departments, said bankers at a Chinese investment bank that previously focused on the technology sector.
The Hong Kong stock exchange helped 17 companies raise a combined total of HK$14.9 billion ($1.9 billion) in the first three months of 2022 in IPO proceeds – a fall of 89 % from a year ago, according to stock exchange documents.
Despite an expected pick-up in momentum in the second half of the year, accounting firm PwC estimated a decline of around 40% on a full-year basis for total HKEX fundraising volume of up to HK$200 billion. , citing economic slowdown and regulatory overhang, according to a Hong Kong Capital Markets report on Wednesday.
HKEX Managing Director Nicolas Aguzin acknowledged “very sensitive” US-China geopolitical tensions in a recent interview with the Financial Times. Aguzin said his priority was to convince investors that China was open for business despite Beijing remaining in its zero-Covid regime.
Hong Kong newspaper Sing Tao Daily first reported last week that two Chinese investment banks plan to lay off around 30% of their staff in Hong Kong this year, affecting more than 100 people in banking departments.
Haitong International, CMBI and Guotai Junan International did not immediately respond to requests for comment.