Investment Banking in Hong Kong

Investment Banking in Hong Kong - If you ever want to get into investment banking in Hong Kong, this guide would help you a lot. You may have many questions about the market, the interview process, the eligibility criteria, and the compensation structure.

This article will investigate and give you a detailed overview of all of these factors.

Have a look at the sequence of the article –

If you are new to Investment Banking, then do visit this starting point - Investment Banking

Hong Kong is the hub of investment banking in China. That’s why most investment bankers come to Hong Kong to build their investment banking careers.

There are two reasons behind that.

First, in recent years, quite a few wealthy people have started living in Hong Kong and want to invest their money in the right investment funds.

Second, there’s an overlap between private banking and investment banking in Hong Kong.

As a result, all investment banks try their hearts out to win even private banking clients. The main purpose of these investment banks is to create a cluster of super-wealthy people and create an investor pool to get assistance now and shortly.

There are three top industries in Hong Kong that investment banks deal with – natural resources, real estate and construction (also called “infrastructure”), and diversified consumer products.

In the near past, IPO deals were given prominence. Because many companies in China were going public and needed assistance to get things done. But things have been changing for the better. And along with IPO deals, investment banks in Hong Kong have been closing M&A deals, and DCM (Debt Capital Market) has been rising.

If we look at the process of closing deals in DCM, ECM, or M&A, there isn’t much difference. But if you talk about due diligence, in Hong Kong it is huge. Due diligence is valued even more than the US and Europe.

For example, suppose any bank first decides to deal with a company. In that case, there will be a first-round of diligence where the management team, their decision-making process, the recruitment, CEO’s decisions, and how they affected the company are thoroughly checked. But that’s not all. There would be a second round of due diligence even if no discrepancies were being found in the first place.

As you can see, investment banking in Hong Kong has been evolving, and we can top-down a few main services investment banks in Hong Kong offer. Let’s have a look –

Debt Primary Market services:

As Basel III was implemented, banks couldn’t provide balance sheet funding and were more expensive. As a result, the debt capital market and securitization have been rising. In the primary debt market, these services are being offered –

• Legal counsel
• Structuring advice
• Transaction execution
• Financial modeling Guides
• Attract a large pool of investors
• Liaise and negotiate with rating agencies etc.

Equity Capital Markets (ECM) services:

ECM is one of the main services investment banks in Hong Kong. Let’s have a look at the gamut of services they offer under ECM –

• Equity: Under equity, they offer share placements, follow-on offerings, initial public offerings (IPOs), block trade and share buy-back, monetization, rights issues etc.
• Structured Equity: Under structured equities, these investment banks offer hedges, embedded-equity loans, collared loans, buy-backs, forward purchases, etc.
• Equity-linked securities: Under this, the banks offer exchangeable bonds, convertible preference shares, convertible bonds, mandatory convertible and exchangeable bonds, etc.
• Hybrids: There are two services these banks offer – subordinated debt offering and preference shares.
• Company listings

Project finance services:

The investment banks in Hong Kong offer few services under project finance as well –

• Financial advisory for mezzanine debt, equity for all large projects, etc.
• Financial structuring
• Sensitivity analysis
• Risk evaluation and mitigation of risk mitigation strategies
• Multi-tranche funding including multilateral finance and development etc.

Leveraged & acquisition of finance services:

Investment banks in Hong Kong take care of their clients by offering them the following services under leverages & acquisition finance –

• Acquisition finance
• Leveraged finance
• Leveraged buyout
• Management buyout
• Public to private finance
• Capex finance
• Mezzanine finance
• Bridge finance etc.

Structured trade and commodity finance services:

Under this head, banks offer the following services –

• Pre-export financing
• Documentary credits and collections
• Repo financing structure
• Import and export financing
• Currency hedging products etc.

Real estate finance services:

As mentioned above, investment banks in Hong Kong invest a lot in real estate and provide solutions for infrastructure finance.

The following is a list of top investment banks in Hong Kong. This list is provided by Global Banking & Finance Review (GBFR) –

• Banco Santander, S.A.
• Bank of China
• Bank of East Asia
• China Construction Bank
• Citibank
• Citic Ka Wa Bank
• Commerzbank
• Dah Sing Bank
• DBS Bank
• Depfa Investment Bank Limited
• First Metro International Investment Company Limited
• Flemings Investment Bank
• Fortis Bank
• Fubon Bank
• Hang Seng Bank
• HSBC
• ICBC Asia
• Kookmin Bank
• Lank Bank of Taiwan, Co., Ltd.
• Mevas Bank
• Nanyang Commercial Bank
• Public Bank
• Royal Bank of Scotland PLC
• Shanghai Commercial Bank
• Standard Chartered Bank
• Svenska Handelsbanken
• Tai Sang Bank Limited
• Taiwan Cooperative Bank, Ltd.
• Toronto Dominion Bank
• UCO Bank
• United Commercial Bank
• Westpac Banking Corporation
• Wing Lung Bank
• Woori Bank

According to asianbankingandfinance.net, here’s a list of Top banks in Hong Kong as per the value of total assets –

1. Hong Kong and Shanghai Banking Corporation (HSBC)
2. Bank of China
3. Hang Seng Bank
4. Standard Chartered Bank
5. The Bank of East Asia
6. Industrial and Commercial Bank of China (ICBC)
7. DBS Bank
8. Nanyang Commercial Bank
9. Wing Hang Bank
10. CITIC Bank International

The recruitment process in Hong Kong is slightly different from other countries because few factors control the recruitment in investment banking in Hong Kong. Let’s have a glance at these factors –

• Living in Hong Kong is imperative: You may not have heard it yet, but it’s true. If you set your eye for Hong Kong and want to build an investment banking career in Hong Kong, you need to stay in Hong Kong. There are two reasons for that. First, staying here will allow you to learn more about the culture, which will help you during interviews. Second, by staying here, you would network pretty well and quite intensively. So go pack your bags and find a place to stay in Hong Kong – it can be a hostel, an Airbnb room, or a shared room with one of your friends.
• Networking is required: If you have ever heard that you don’t need to do networking for investment banking in Hong Kong in Asia, know that it’s not the right information. Since the interviews here are very unstructured compared to the US or Europe, you need to do networking quite intensively here. Intensive networking means meeting people in person if and when it seems necessary. Only cold calling and cold emailing will not cut.
• Internships: These days competition is fierce and no-one is ready to leave an inch. At this time, doing internships in Investment Banking is a must. If you can do a couple, you would be better off. So don’t ever think that you will get a full-time opportunity in Hong Kong, even if you don’t have internship experience in Hong Kong. You must do an internship for at least six months to score well in the interview for a full-time opportunity. Try for more internships if you have time and opportunity. Your job would be to stand out as a candidate so that your chance of getting an offer is higher.
• Interviews: As mentioned above, interviews for investment banking in Hong Kong are much more unstructured than interviews in the US or Europe. Overall, the whole interview process is very random. You may need to go through 15+ interviews to get an offer, or sometimes you can get early offers. The investment banking interview questions would include “fit” questions, “technical” questions, and “personality type” questions. You need to know Mandarin Chinese pretty well because, during the interview, they may ask you a question or two in Mandarin and also may ask you to translate an article or a news report into Mandarin.
• Ideal Candidate: Ideal candidate is a pass out from a top-notch school in the US, the UK, or Australia, and a native Chinese who would like to build a career in investment banking in Hong Kong. S/he also needs to know the native language quite well and complete a 6-12 month internship before trying out their fate for a full-time opportunity.

If you think that Hong Kong is an Asian country and there’s less opportunity for networking and meeting people, you’re wrong. You can meet people quite randomly if you choose because Hong Kong is an international hub for business worldwide!

From MDs to analysts, people visit similar places and often hang out with each other. So if you are looking for a job change or trying to network for your first full-time job, hanging out in these places may be a good idea.

Working in Hong Kong is like working in the US or the UK. The work hours are pretty similar, but the pressure of closing deals is lesser. In addition, there will be many deals in the pipeline; as a result, investment bankers always don’t need to pitch for new deals.

First, let’s talk about the tax rate. The tax rate is much less in Hong Kong than in other western countries; that means you would be able to save a lot more than in other countries.

Let’s have a look at the salary structure of investment banking in Hong Kong –

source: efinancialcareers.com

If we look at the above chart, investment banking salaries in Hong Kong look quite enticing. At the analyst level, you would be able to earn around HK $690,000 per annum on average, and you will also be eligible for at least a bonus of 35%, which is excellent. On the other hand, at the MD level, your earning will have no bound, and you will see a huge sum of money, i.e., around HK $3,500,000 per annum plus at least 100% bonus; this bonus can also sometimes reach around 130% plus.

People leave investment banking in Hong Kong only when they get a good opportunity elsewhere. There are a few exit opportunities you can consider –

• You can leave your job and can explore the buy-side at firms. You can also try out in countries like the US or the UK.
• You can take an internal transfer and go back to your home country if you’re a foreigner in Hong Kong.
• You can leave the investment banking career and start your own business.

Getting a full-time opportunity in investment banking in Hong Kong is never easy. But if you can do it, the compensation and the growth are excellent. So there’s no reason you shouldn’t try out in Hong Kong if you want to build a lucrative career in investment banking.

This has been a guide to investment banking in Hong Kong, a list of top investment banks in Hong Kong, and their services. You may also have a look at these investment banking services in the below countries –

• China Investment banking 
• Investment Banking in Russia
• Singapore Investment Banking
• Australia Investment Banking