Hong Kong’s Covid-19 measures put pressure on funding in Asian financial hub


Hong Kong’s most recent measures to combat Covid-19 are disrupting its large community of bankers and investors, many of whom were already struggling to juggle business and family commitments with severely curtailed travel.

Some finance professionals have asked employers if they can relocate, while a few expats have decided in recent months to quit and move. Others are considering options that could divide their families for months or more as they try to place their children in more stable schooling and away from the risk of mandatory quarantine.

The pressure is hitting the industry as it wages a war for talent, amid a long-term upsurge in Chinese capital raisings. A broader global banking boom sent bonuses soaring as it generated record profits for the Wall Street giants.

The financial hub is a base for Western banks such as Citigroup Inc.,

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Goldman Sachs Group Inc. and Morgan Stanley,

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as well as numerous hedge funds, asset managers, private equity firms and others.

Leaders must decide whether it’s worth retaining top talent to move to other cities and where to base some big regional roles that would once naturally have been in Hong Kong. Meanwhile, they are struggling to persuade some new applicants to settle in the city.

“There have been a lot of requests from bankers to their department heads asking to be transferred to other cities like Singapore or to return to their home countries,” said Eugenia Bae, a Hong Kong-based recruiter for banks and investment funds. “They want to go home, to places like the United States, France, Japan and South Korea, or cities that have announced they will be living with the virus.”

Hong Kong was an oasis at the start of the pandemic. Since then, a zero-Covid approach that has included flight bans for months, some of the toughest quarantine rules in the world and a stop-start approach to in-person schooling has left her more isolated, as has d Other global financial centers such as London, New York and Singapore have reopened.

Queuing to buy Covid-19 rapid test kits in Hong Kong on Monday.


Photo:

Bertha Wang/Bloomberg News

The problems became acute as the city’s battle with the Omicron variant escalated.

On February 22, Chief Executive Carrie Lam unveiled plans to close schools for a spring summer break before reopening them in the summer, extend social distancing measures and flight bans until mid- April and to enlist the help of mainland China to test the entire population several times in March. For many parents, the prospect of forced separation if a child tests positive is of particular concern.

Hong Kong's Covid-19 measures put pressure on funding in Asian financial hub

Hong Kong leader Carrie Lam said schools would close for the first summer vacation.


Photo:

Department of Information Services/Zuma Press

Two senior capital markets bankers at US investment banks have said their wives and children will move next month to Singapore and the US, respectively, to escape Hong Kong’s zero Covid policy. One said he could follow his family if there were no signs of improvement in Hong Kong’s tough virus stance and many of his colleagues also wanted to move. The second plans to stay because his boss does not plan to leave.

The banks themselves do not direct the movements. There’s a lot of business to do in Hong Kong, and a visible withdrawal could offend local and Beijing governments. Relocating staff can also lead to tax and regulatory complications. But they try to be flexible as much as possible.

JPMorgan Chase JPM -4.17%

& Co. appointed a new head of equity capital markets for Asia-Pacific in late January after managing director Francesco Lavatelli, who had held the role for two years, decided to move to London, where he will serve as global head of banking. corporate equity derivatives.

Hong Kong's Covid-19 measures put pressure on funding in Asian financial hub

Stock up on Covid-19 tests Monday in Hong Kong.


Photo:

Vincent Yu/Associated Press

The US lender turned to Murli Maiya, who had been the bank’s CEO for South Asia and Southeast Asia for about a year and had planned to move to Singapore. The longtime banker will instead remain in Hong Kong and work with Mr. Lavatelli in the coming months to ensure a smooth transition, according to an internal memo.

Some senior replacements move to Hong Kong. At JPMorgan, Sarah Perring will leave Tokyo to take up a regional leadership role in the bank’s equity sales and trading business, a memo said. In a post on LinkedIn, his predecessor, Ryan Holsheimer, said it was time to “hang up the boots” after 27 years in finance and reunite with his family in Australia after two years apart during the pandemic.

The tough new policies add to concerns about Hong Kong’s growing isolation and lack of a roadmap for eventual reopening.

In October, the Asia Securities Industry & Financial Markets Association told the government that many members were considering moving employees or functions overseas and were struggling to hire and retain staff. Some banks have started to reimburse staff for quarantined hotel stays after personal travel.

“Travel restrictions and quarantine make Hong Kong’s historic role as a hub for Asia very difficult,” said Simon Kavanagh, partner at BDA Partners and head of the investment bank’s Hong Kong office. focused on Asia.

“Hong Kong will become increasingly isolated as a business hub as the rest of the world returns to normal, if current travel restrictions remain in place,” Kavanagh said. He said it was “virtually impossible to hire senior executives in Hong Kong in the current environment.”

However, Mr Kavanagh said Hong Kong would eventually return to normal and he had no intention of leaving. BDA expects business to be strong this year given an active regional M&A market.

Hong Kong's Covid-19 measures put pressure on funding in Asian financial hub

Hong Kong is building new isolation facilities like this.


Photo:

Jerome Favre/Shutterstock

Standard Chartered STAN 0.41%

PLC chief executive Bill Winters recently pointed to risks to Hong Kong’s dominant regional position due to its “relatively restrictive mobility patterns”.

Some institutions make short-term compromises. Prudential PUK -5.62%

PLC’s next permanent chief executive will likely run the insurer from Hong Kong, but not for now. “We expect the new CEO to be based outside of Hong Kong until, from a practical perspective, it is easier to be able to run a pan-Asian and African business from there,” he said. said a spokesperson.

Another headache is the overall talent shortage as Hong Kong’s population shrinks. Quinlan & Associates, a financial advisory firm, estimates that net migration over 2020-2022 could total 304,000, or 4% of the population.

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The city’s Securities and Futures Commission recently told lawmakers it faces a tight and competitive job market, made worse by “the limited ability to import talent from outside Hong Kong and the effect of emigration”. Many SFC employees are locals.

Hong Kong has gone through financial, political and health crises over the past quarter century. The wealth and liquidity of the market, along with the expertise and professional networks built over decades, make it difficult to replace. The same goes for its role as China’s financial gateway to the world in areas such as stock, bond and currency trading. The city government is eager to strengthen Hong Kong’s role as a financial hub.

This means expat departures could simply accelerate a long-lasting shift in which Chinese businesses and Mandarin-speaking staff become more important to Hong Kong’s entire financial sector.

HSBC Holdings HSBC -4.77%

PLC recently warned investors that the city’s Covid-19 restrictions could affect the ability to attract and retain staff, but its executives remain optimistic.

“We are still very confident in the Hong Kong market and its role as a financial centre,” HSBC Chief Executive Noel Quinn told The Wall Street Journal as the bank, which is listed in Hong Kong and London, published its annual results. “We believe Hong Kong has proven to be very resilient.”

As countries ease Covid-19 restrictions, Hong Kong is sticking to a “dynamic zero-Covid” approach – with help from Beijing. A rise in cases has overwhelmed hospitals and is threatening business confidence in the global financial hub. Photo: Bertha Wang/Bloomberg

Write to Quentin Webb at [email protected] and Frances Yoon at [email protected]

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