A slowdown in dealmaking in Asia partly due to the US-China trade war has hit the bonuses of some of the region’s top investment bankers.
At Swiss lender UBS, investment bankers’ bonus pool for 2019 shrank around 14 per cent compared with the previous year, people familiar with the matter said. The overall bonus pool for the global banking unit, which also includes equities and currency trading, fell around 10 per cent.
Morgan Stanley, which last week reported a 46 per cent year-on-year rise in quarterly profits, cut its 2019 investment banking bonus pool by about 9 per cent in Asia, people close to the bank said. At its results announcement the US lender said it planned to lower its cost-to-income ratio to less than 70 per cent versus 73 per cent in 2019, as part of a push for greater efficiency.
Citigroup’s investment bank bonus pool for 2019 was cut by 6 per cent while Goldman Sachs’ bonuses for the investment banking division were little changed, according to people familiar with the situation.
UBS, Citi, Morgan Stanley and Goldman Sachs declined to comment.
One Hong Kong-based banker said 2019 had been “a tough year, the markets are down because of the US-China trade war”. The bulk of investment banking fees in Hong Kong came from a single deal — Alibaba’s $12.9bn secondary listing, he added.
Dealmaking in Asia stuttered last year against the backdrop of an economic slowdown in China and the country’s trade tensions with the US. Merger and acquisitions in Asia excluding Japan fell to $693bn last year, according to data compiled by Dealogic, the lowest volume since 2014. The number of deals was the fewest since 2006.
$639bn
Merger and acquisitions in Asia (excluding Japan) last year, the lowest volume since 2014
Hong Kong maintained its status as the world’s leading fundraising venue in 2019 thanks to Alibaba’s listing in November, edging out New York. China International Capital Corporation and Credit Suisse led the listing, with Citigroup, JPMorgan Chase and Morgan Stanley also involved.
“Most people at the international banks saw the fall in deal volumes and fees last year and knew [bonuses] would be down in the region,” said Rupert Hay, a Hong Kong-based associate director at recruiter Morgan McKinley, which specialises in the financial and professional services sectors.
News of the cuts to bankers’ bonuses in Asia was first reported by Bloomberg.
Some banks were also hit by sanctions which affected revenues last year. In March, Hong Kong’s Securities and Futures Commission suspended UBS’s licence to lead IPOs in the city and fined the bank $48m for failing to conduct adequate due diligence on a number of companies. The ban was lifted in January, two months ahead of schedule.
Foreign banks in Hong Kong are also facing growing competition from Chinese rivals, such as Citic, CICC and Haitong.
Chinese securities houses in the past five years have been looking to gain market share just as the international banks have focused more on boosting shareholder returns and complying with regulations, Mr Hay said.
“It is very challenging for western banks in this environment having different objectives and outcomes to the Chinese banks,” he added.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
