Morning Coffee: Goldman Sachs, Morgan Stanley back to being excited about growing in Asia. The most unobtainable internships are at Blackstone

“May you live in interesting times” is not, actually a Chinese curse or proverb. And well might it not be, since every investment banker who has ever tried to make a living in the APAC region knows that it’s always an interesting time in China.  For good or bad, the last three decades have seen non-stop action, from highs of the seemingly unstoppable IPO boom, to the low points of political repression, public disorder and compulsory study sessions.  And whether it's up or down, China sets the tone for the whole geography – although India and Japan have both seen very strong performance over the last two years, the relative sizes of the fee pools mean that it’s hard to get really excited about the continent of Asia unless there’s at least some hope for the “Greater China” markets.

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But now, it seems that some of the smartest bankers in the region are beginning to say that it’s time to get excited again.  Both Gokul Laroia of Morgan Stanley and Iain Drayton of Goldman Sachs are talking about “strong tailwinds” in their APAC capital markets and M&A business.  Although revenues are rising from a low base, any growth at all looks good compared to other geographies, and the opportunity is substantial – Laroia is targeting $10bn of income in five years, compared to $7.64bn last year.

Both banks have been partly boosted by trading revenues, as the local stock markets have finally turned around. Laroia has declared that “there’s a very broad cross-section of global investors and increasingly a rapidly growing pool of local capital that is trading these markets more actively than they’ve traded in the past.”  Goldman and Morgan have expanded the kinds of products they trade and acquired new derivatives trading licences.  And, having made fewer cuts than some other global players, they remain in the top three for capital markets and M&A across the region.

Whether this continues to be the case as revenues pick up is open to question, though. During the slump, a number of local banks like Citic, Haitong and China Merchants Securities have built up their franchises, often hiring staff directly from global firms making their exits. These local firms have good government connections and corporate relationships, and might be well- placed to break into the top ranks if their domestic strongholds start to drive the league tables once more. HSBC is also redoubling its focus on APAC, having left a number of other markets in order to do so.

If Goldman and Morgan Stanley are right, we are also likely to see the return of many of the banks that downsized.  This is rarely a good idea; clients have long memories; so do employees.  It’s hard for any management team to resist investing in a growth story, though, so we should expect to see fierce competition for lower league table places, as mid-and second-tier global names hire back the same kinds of bankers they got rid of.  After a long period in the doldrums, the labour market for APAC bankers might be about to get interesting – in a good way – again.

Elsewhere, one of the biggest questions of private equity recruitment is why, if PE firms really want to hire the very best graduates, they don't just run their own campus programs, rather than trying to pick from the investment bank analyst classes? Blackstone actually does this. It has its own graduate intake, which starts with an internship.

It's a very competitive program, but it's also small. Blackstone had 170 interns this year, up from 150 last year, and it’s by no means a certain path into private equity.  The summer internship is the main source of talent for the full-time analyst program, which has an acceptance ratio of only 0.3% of applications. That makes it harder to get into than Goldman Sachs and Citadel/Citadel Securities (with acceptance rates of 0.7% and 0.4%.) Even Blackstone CEO Steve Schwartzman’s welcome address to the interns told them to give themselves a pat on the back for getting so far. 

Meanwhile…

One driver of hedge funds setting up offices in the UAE is that some of their best employees want to live there.  Usually for the tax advantages, but it’s apparently not unknown for a visiting trader to fall in love on a trip to Dubai. (Bloomberg)

Possibly because he feels more at home among all the other traders (see above), Mike Platt of BlueCrest has also relocated to the Emirates. (Financial News)

Chris Arnade, the physicist turned emerging market debt trader, turned pundit and whisperer to Real Americans, thinks that of all the people he’s met in his varied career, bankers were in general the most interesting. (Conversations With Tyler)

Goldman Sachs interns are being encouraged to adopt a “coffee culture” and invite senior bankers for a latte.  This is apparently a way to demonstrate cultural fit, and the group heads are “very willing to do that sort of thing”.  (Business Insider)

Hauck Aufhaüser Lampe is a reasonably well-regarded local boutique in Germany, which has just had 15 bankers and traders lifted by Cantor Fitzgerald.  Cantor is even considering opening a Hamburg office to complement its existing Frankfurt one, demonstrating seriousness about wanting to expand its European footprint. (Bloomberg)

Cantor is not the only mid-tier US player that wants to plant a flag in the euro area. Greg Revenu was one of the founders of French boutique Bryan Garnier, and after its acquisition by Stifel he’s now aiming to create “one of the biggest technology and healthcare focused teams in the region”, aiming at mid-market M&A (Financial News)

An absolutely wild longread about the “Enhanced Games”, and a former Olympic swimmer who wanted to break the world record, but ended up on a regime of supplements which made him so big he kept bursting his swimsuits. (WIRED)

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