Karen Tan finished her master’s degree in mathematics at the University of Cambridge three years ago and set her sights on a career in U.K. finance.
But after six frustrating months failing to find a job in London, the Chinese native changed tack and returned to Asia. She eventually landed a position as a macro strategy analyst at a Chinese investment bank in Hong Kong — and she’s happy to remain in the city.
As global investment banks cut thousands of analyst jobs over the past years, Chinese firms went the other way and bulked up their research departments. The divide is being exacerbated by the adoption in January of the European Union’s revised Markets in Financial Instruments Directive, which will upend the way banks long charged clients for research. Chinese investment banks, by and large, are insulated from the new rules, known commonly as MiFID II.
The shift is leading hordes of overseas-educated Chinese like Tan to abandon plans for financial careers abroad and return home. Headhunting firm Michael Page has seen overseas applicants for financial job openings in Shanghai — including analyst positions — reach 500 over the past year, as job seekers decide that China is where the opportunities are. That’s about 50 percent more than the previous year, said Kristina Liang, a Michael Page consultant in Shanghai.
“It’s definitely a lot more difficult to find a research job in Europe now with MiFID II,” said Tan, 28. “I see myself staying in Hong Kong because of all the opportunities here. A lot of Chinese brokerages are still expanding, basically unaffected by MiFID.”
The new European rules, due to be introduced in January, are reshaping the global securities industry by requiring an end to cross subsidies for market research. As they negotiate prices for research, many companies have frozen hiring or started to lay off analysts. Chinese firms, in contrast, with their focus on the vast domestic retail market, are largely shielded from MiFID II, which only applies to banks and brokerages that interact with European asset managers.
McKinsey & Co. estimates that MiFID II will prompt the 10 biggest European sell-side banks to reduce global spending on research by $1.2 billion annually over the next three years. That probably means more job losses among analysts, even after almost 4,000 positions disappeared between 2011 and the end of last year, according to McKinsey. The U.K.’s decision to divorce from the European Union also weakened London’s appeal as a financial job destination, Liang said.
In mainland China, the number of analysts jumped roughly 20 percent during the same period, according to Securities Association of China, as an expanding economy, deepening links with the global financial system and the swelling ranks of publicly traded companies stimulated demand for research.
The impact on Chinese securities firms’ appetite for analysts is also being felt in Hong Kong, the enclave which serves as China’s financial gateway to the world.
“China is one of the best places to work at if you are a sell-side analyst,” said Shen Minggao, chief economist and head of offshore research at China’s GF Securities Co. in Hong Kong. GF Securities plans to more than double its 20-person research team in Hong Kong to beef up its ability to analyze both Chinese and global markets, according to Shen, who previously worked at Citigroup Inc. The firm is not really affected by MiFID II, said Shen.
MiFID II doesn’t just apply in Europe, but to any bank or financial firm that deals with clients based there. Most large U.S. and Japanese firms do — unlike their Chinese counterparts, who mainly focus on the home market.
For most Chinese brokerages, especially the smaller ones without international ambitions, the MiFID II rules are “kind of irrelevant,” said Keith Pogson, a managing partner at Ernst & Young in Hong Kong. “They don’t have European customers, they are not doing European products and they are definitely not doing anything on the European exchange directly themselves.”
To be sure, overseas Chinese returning to the mainland from Europe to look for analyst jobs with local securities firms will have to accept a big cut in pay compared with equivalent jobs in London, according to Liang. Average salaries are about 30-40 percent lower than in the U.K., she said.
Even so, some Chinese firms stand ready to capitalize on their global competitors’ woes.
“If they cut jobs, we will have more opportunities to pick and choose,” said Bocom International Holdings Co. chief strategist Hao Hong, Tan’s boss. Hong said he plans to add at least 10 people to his 50-person research team in China and Hong Kong.