China cash squeeze crimps HK bank hiring

Recruiting for Hong Kong’s financial services industry may remain stagnant or even slow down in the rest of 2013 amid concerns about the recent liquidity crunch in China, banks and recruiters are warning.

Hong Kong has close ties with China, and the city's banking sector has been aggressively raising its Chinese exposure in the past 10 years. This means that it will not be easy for Hong Kong banks to avoid any contagion effect.

According to the latest quarterly Job Barometer from eFinancialCareers, the number of financial services job opportunities in Hong Kong was down 24% year-on-year in the first quarter of 2013, and there are signs that it will persist or even worsen in the remainder of the year.

Chinese banks holding fire

The liquidity squeeze in the Chinese interbank lending market caused a sharp rise in short-term rates to historical highs in late June. This was due to a combination of reasons, including the quarterly window dressing - a strategy used by mutual fund and portfolio managers near the year- or quarter-end to improve the appearance of the portfolio/fund performance before presenting it to clients or shareholders.

Another cause of the cash squeeze is rising demand for liquidity in long-term investments like infrastructure projects, while the much-reported crackdown on 'shadow banking' has also been blamed. 

A senior consultant at a Hong Kong recruitment firm, who asked not to be named, says people in the financial services are trying to hold on to their jobs.

“Hong Kong offices are not expanding their head counts and the overall scenario is not positive,” she says. “I don’t expect a turnaround in the near term. Some people are worried about losing their jobs.”

She says the credit crunch in China has definitely had an impact. "Earlier this year, when global banks laid off staff in Hong Kong, we were still seeing some Chinese financial institutions making hires. But the situation is different now.”

A senior manager of the compliance and legal department of a Hong Kong-based bank says that the spillover of risk from China’s tight interbank market into the Hong Kong banking system should not be exaggerated, but he expects to see ramifications surface over the next few quarters.

As always, banks still hiring in compliance and legal

“As a result of the recent credit crunch in China, Hong Kong banks are not likely to increase staff aggressively."

He says the bank is not expected to announce significant staff cuts now, and some divisions are even hiring. “Our department, that is the compliance and legal section, is still adding staff due to the changes in both local and international regulations.”

Ka Chung Law, chief economist and strategist at the Bank of Communications in Hong Kong, says Hong Kong banks started cutting down on recruiting before the liquidity problem emerged in China.

The slowdown has been evident since the US Federal Reserve said it would review quantitative easing later in 2013.

“Cash is king. We know what’s happening in the US and now when the Chinese authorities are tightening liquidity, we are feeling more pain from stock market volatility. And this has a bigger impact on front-office recruitment, both in Hong Kong and the rest of Asia.”