Chinese investment banks are now attracting top talent, matching Wall Street lenders with their pay packages as lenders from the mainland grab larger roles in new listings in Hong Kong, according to a top executive at Haitong International.
Out of the 4,861 initial public offerings (IPOs) and other securities offerings during the five-year period up to 2021, over 65 per cent was handled by mainland or Hong Kong-based investment banks, according to Dealogic.
"Many mainland investment banks can now offer a pay package similar to US or European lenders," Kenneth Ho Shiu-pong, head of equity capital markets at Haitong International, said in an interview. The firm handled 215 deals between 2017 and 2021, and was the top arranger in 2019 and 2020, according to Bloomberg data.
Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.
Junior bankers opting for a career with mainland investment banks can have the same growth trajectory as their peers at Wall Street rivals, he said when discussing the developments of Hong Kong's investment banking sector since the handover to China in July 1997.
Kenneth Ho Shiu-pong, Haitong International's head of equity capital markets. Photo: Xiaomei Chen alt=Kenneth Ho Shiu-pong, Haitong International's head of equity capital markets. Photo: Xiaomei Chen>
The mainland investment banks' pay packages have been catching up quickly with their Western rivals and have become extremely competitive in recent years, according to recruiters.
"Many experienced Wall Street bankers and youngsters like to join mainland investment banks with an eye on their future career path," said Jerry Chang, managing director of executive search firm Barons & Company, noting that Chinese companies will continue to be the source of new listings in Hong Kong.
Haitong International brought the most deals to the Hong Kong market in 2019 and 2020, based on Bloomberg ranking. It ranked second last year in terms of funds raised and number of new listings ahead of CMB International Capital and Goldman Sachs, China International Capital Corp took the crown.
Ho, 45, is among those who have switched from Western to mainland banks.
Born and brought up in Hong Kong, Ho graduated with a bachelor's degree in computer science and followed it up with a master's degree in finance, both from Australia. He worked briefly there as an analyst at State Street Global Advisors. He worked at DBS Group, Cazenove Asia and Standard Chartered after returning to Hong Kong, before joining Haitong International in 2012.
"At the time of the handover, almost all the IPO deals were handled by the big Wall Street lenders," Ho said, while many mainland financial firms only started to expand in Hong Kong over the past 10 to 15 years.
Haitong Securities entered Hong Kong by taking over Tai Fook Securities in 2009, renaming it as Haitong International a year later. Everbright Securities invested in Sun Hung Kai Financial in 2015, which has now been renamed as Everbright Securities International.
In the 2000s, international investment banks teamed up with their mainland counterparts to get deals done. In recent years, however, the tide has turned with mainland banks playing a more dominant role compared with US or European banks.
"Every three in four new listings last year saw mainland investment banks acting as sponsors, which goes to show their importance," Christopher Hui Ching-yu, Secretary for Financial Services and the Treasury, wrote in his blog last month. "With more US-listed mainland firms opting to return to list in Hong Kong, their role is more important than ever before."
The change in fortune is very much related to the evolution of the local market, with mainland companies accounting for 98 per cent of the funds raised last year, compared with 50 per cent a decade ago, according to data from Refinitiv. Chinese firms now represent over 80 per cent of market cap and turnover, compared with 15 per cent in 1997.
Haitong's Ho said that mainland companies like to hire domestic banks as their listing sponsors as they understand the background and culture, noting that his team has grown three times in size since he joined in 2012. "The mainland investment banks act as a two-way bridge to the world and back into China."
Mainland investment banks along with their Western peers have all suffered from the paucity of IPOs in the first half of this year. Hong Kong, the largest IPO market worldwide seven times in the past 13 years, dropped to tenth in the first half as funds raised sank 92 per cent year on year.
"We have all suffered from the poor market sentiment and sharp fall in new listings this year," Ho said, adding that his company has been helping corporate clients raise funds through global depository receipts in Switzerland, Germany and London.
"There is a stereotypical notion that mainland investment banks only conduct deals for mainland companies and can only serve mainland investors. In fact, we have offices in six international markets including the US and London, and have brought international fund houses and others as cornerstone investors for many new listings."
