China stock stars set for big bonuses, bond traders for payout cuts
HONG KONG: Top China share traders are set to enjoy the spoils from year-end payouts, while their Asia fixed income counterparts and dealmakers will miss out despite a record year for mergers in the region, headhunters and senior bankers said.
Banks, including UBS and HSBC, saw a boom year in Asia stock trading, sources at those firms and recruiters said, thanks to a China buying frenzy in the first half of 2015 that pushed the Shanghai Shenzhen CSI 300 index up 47 percent from January to June.
Big payouts for China stock traders highlight the increasing divergence of bankers’ variable pay, as global firms distribute a bonus pool shrunk by fines and weaker revenues among a smaller number of standout performers each year.
Profits from the first-half China stock market rally were strong enough to outweigh trading losses and slower sales during a summer market crash, headhunters said.
The fixed income business, though, has struggled amid higher capital costs, turbulent markets, and uncertainty over U.S. interest rate policy.
“Bonuses in Asia this year are going to be very polarized between equities and fixed income, even more so than last year,” said Sarah Harte, a director at headhunting firm Sheffield Haworth. “Equities will be paid better than fixed income and some banks will have to pay up for those people who have performed over and above, and whom they cannot afford to lose,” she said.
Overall, bonuses in the equities investment banking business are expected to be broadly flat this year compared to 2014, as banks take a conservative position amid a gloomy outlook for 2016 due to the China downturn and regulatory costs, headhunters said.
Some Hong Kong-based China stock trading stars, however, can expect to receive 100 percent bonuses, meaning a top-performing director on an annual base salary of $350,000 could earn as much again in annual bonus, recruiters said.
“Many banks lost money in the July-August China and Korea market rout, but the first half was so strong it’s still a good year overall,” said Duncan Mackay, a director at recruitment firm Mantis Partners who specializes in equities hiring. The benchmark South Korean stock index fell 7.5 percent in July-August.
Some portfolio managers at long-short hedge funds who rode the China boom and sat out the crash are due to take home as much as $500,000 in bonus alone this year, according to one headhunter with knowledge of several funds’ plans.
For the majority of Asia bankers it will, however, be a disappointing Christmas.
Despite Asia mergers hitting the $1 trillion mark this year, the regional bonus pool has been diminished by global restructuring costs, U.S. and European watchdog fines, and poor performance in the fixed income, currencies and commodities (FICC) business.
Global investment bank revenues are expected to fall 2 percent this year from 2014, led by a drop in FICC trading revenues which among the top 13 banks fell 20 percent to $15.6 billion in the third-quarter, according to data analysis firm Tricumen. This is set to drag bonuses in the fixed income business down by as much as 20 percent, said headhunters, who also noted ongoing job cuts in this business in both Hong Kong and Singapore.
As in Asia, equities traders in London are expected to buck the global shift toward falling bonuses with an average 2-3 percent rise in payout, according to salary benchmarking research firm Emolument.
“For the most part there is a decent amount of uncertainty about what 2016 holds,” said John Mullally, director, financial services, at recruitment firm Robert Walters. “Expectations regarding year-end bonuses are therefore justifiably being managed rather closely.”