From an investment banker that has worked in London, Hong Kong and Singapore
New York and London are so yesterday – Hong Kong and Singapore now service the world’s most relevant emerging markets in China and Southeast Asia (and India to some extent). What does it mean to work as an APAC investment banker and which one is better?
Getting into Investment Banking in Hong Kong and Singapore
As with any other market (including the US and London), there are benefits to meeting local content requirement quotas – so if you have right to work in Hong Kong and Singapore through citizenship, this makes it far more likely that you will get hired at an entry level position.
Understandably, it is politically useful to make spots available for citizens, especially those who have graduated from local universities. However, the top tier candidate today is someone who attended an elite educational institution in the US or UK before coming back from overseas.
For someone from Hong Kong, a typical front office investment banker may have had this career path:
Top-tier English instruction high school (Chinese International School, Hong Kong International School, St. Pauls, Diocesan Girls School) -> Oxbridge, LSE, Imperial, Harvard, Wharton -> Goldman Sachs, Morgan Stanley, JP Morgan -> Blackstone -> Government
For someone from Singapore, replace the high school with Hwa Chung or Raffles College
Large numbers of locals and Mainland Chinese at establishments such as HKUST, National University of Singapore and Singapore Management University are also hired for entry level investment banking analyst positions as well as students with these degrees plus a masters from a brand name school in the UK.
Dwindling Expat Numbers in Hong Kong and Singapore
Singapore and Hong Kong have both been known to be expat heaven. Excellent salaries, a low tax base (17% in Hong Kong, 22% in Singapore) and the most expensive part of a big city taken care of through generous housing allowances (Hong Kong rent is more expensive than New York per square foot).
Twenty years ago, almost every banker or corporate lawyer (with more UK firms than US ones for example Clifford Chance, Linklaters, Allen & Overy – Hong Kong and Singapore both being ex-colonies of the British Empire) was a London transplant. Today, non-essential expats are getting phased out. For one, the trend is moving towards the so-called Local Expat – someone who is a local with the prerequisite education and work experience but without the perks. Also, the skillset required is shifting towards Mandarin in Hong Kong given that the client base for IPOs, M&A and DCM are overwhelmingly Chinese now.
The client base is switching from Asian divisions of multinational corporations and servicing the British Hongs such as Jardine Matheson and Swire Group to large Chinese financials with a focus on relationship management. In Singapore, almost all prominent South East Asian conglomerates are run by the bamboo network of southern Chinese diaspora with ample investment in China. In some sense, hard technicals and fundamental analysis are less important than relationships.
However, as China, India and Southeast Asia grow bigger and their markets develop and mature, relationships do not cut it and real advisory expertise is required. Especially for introducing capital markets products to Asia, still in nascent stages of growth, VPs and managing directors (and directors who have been stuck and are looking for a new market to gain the MD title) are being moved over to Asia to lead M&A and other financial advisory practices that are being built out.
Do You Need Mandarin to Work in Investment Banking in Hong Kong and Singapore?
For the expert expats mentioned, no Mandarin is necessary.
However, 90% of jobs at global banks and 100% of jobs at Chinese banks require Mandarin fluency for Hong Kong. In Singapore, notwithstanding the India team, Mandarin is a huge plus but not 100% necessary.
This is now, but in another generation, expect Mandarin fluency to be across the board as the sheer number of educated Chinese can make anyone who does not have the skills redundant. Many banks are offering free Mandarin lessons to staff.
An appreciation of Chinese culture is also required in order to effectively deal with Chinese clients, especially as the current market conditions are still less developed, high growth and dependent on concepts such as guanxi. This is less relevant in Singapore, which tends to be a more direct business culture.
This extends to writing and reading as well – it is impossible to wade through financial statements of Chinese companies without having a certain level of fluency.
Living in Hong Kong versus Singapore for Investment Bankers
Singapore is a lot cheaper than Hong Kong rent wise owing to better housing policy and governance (less unchecked capitalism). Hong Kong rents are ridiculous and laws are extremely landlord friendly. Many local bankers will elect to live with their families rather than renting and buying is out of the question, especially for expats (stamp duty).
Getting around is easier in Singapore owing to better urban planning but both have outstanding public transport systems in their subways (MTR and MRT). It is cheap enough to cab everywhere with a career in finance in either city but trips in Hong Kong are more easily congested and streets are extremely random. For many places, it is faster to walk than to hail a cab in Hong Kong.
Food options are excellent in both places but for higher end food, Hong Kong is prohibitively expensive versus Singapore – even for investment bankers. However, for drinking and nightlife, the two are about the same because Singapore has heavy duties on alcohol.
General consensus amongst bankers is that they would rather raise a family in Singapore.
Investment Banking Work in Hong Kong versus Singapore
Hong Kong has basically become a China only market – there is enough business there that they do not need anything else. Right now, capital markets activity is muted because of a shift in Chinese government directive. Companies are deleveraging and anti-corruption campaigns and general clean-ups are ongoing.
How does this affect investment banking activity? It means that offshore mergers (Chinese companies buying foreign firms) are being closely scrutinized and basically not happening because the Chinese government does not want to see capital flight. This also means that IPOs are encouraged to list in Hong Kong, Shanghai or Shenzhen instead as well, as opposed to being bartered for US dollars. So ECM is running hot, M&A is more internal or supports a smaller pool of conglomerates (ones with actual businesses as opposed to relationships giving them access to easy debt) versus before.
A lot of debt issuance continues despite a wave of defaults and weaker credits.
Singapore has become an everything else market. Singapore is a favoured place to list and do business for Southeast Asia and India owing to the shared language capabilities as well as a high level of investor trust in their government and laws. Singapore itself has large financial institutions – both banks (DBS, United Overseas Bank or UOB and Oversea-Chinese Banking Corporation or OCBC) and asset managers – and a huge GDP that requires capital markets service.