Chinese technology companies have a thing for hiring investment bankers in Hong Kong and mainland China, but J.P. Morgan hasn’t traditionally been their preferred headhunting ground. That now looks likely to change.
The US firm announced a radical tech-driven revamp of its China investment banking coverage earlier this week as it looks to capture more business from the ‘new economy’ companies in China that are expected to raise $200bn in capital over the next few years.
J.P. Morgan’s China bankers will work in seven new tech-focused sectors: financial services and technology, health care and technology, enterprise and technology services, new mobility, lifestyle and smart manufacturing, digital access, and infrastructure and commodities. And the bank will grow its China team by 40% to 50% over the next few years (from an undisclosed current headcount) as it launches a new majority-owned onshore securities company.
J.P. Morgan’s push into the high-growth Chinese new economy makes sense. Tech-targeted Asia Pacific M&A reached a record-high Q1 volume of $45.8bn in 2018, but J.P. Morgan was not in the top-10 banks for Q1 APAC technology revenue, nor was it a year previously, according to Dealogic. Technology is not a sector that Western banks have been locked out of by their Chinese counterparts, however, so J.P. Morgan has the potential to improve its market share. Credit Suisse finished top of the APAC league table last quarter, while Citi, Goldman Sachs and Morgan Stanley were also in the top 10.
The major players in technology banking in Asia – a market dominated by Chinese deals – are typically the most vulnerable to hiring raids from Chinese tech companies, which are building in-house corporate development teams, mainly staffed by ex-bankers.
Alibaba, whose president is Goldman veteran Michael Evans, has plenty of former bankers on its payroll below the C-suite. For example, Kshitij Karundia, now a senior Hong Kong-based director in Alibaba’s strategic investments unit, moved to the Chinese tech firm having served it as a client in his previous role as a director in Citi’s TMT team.
While Chinese tech companies like Alibaba, Tencent and JD.com don’t always recruit TMT specialists when they hire from banks, J.P. Morgan’s new strategy now makes it particularly appealing to them, says a Hong Kong tech headhunter. “It means that pretty much every JPM banker who covers China will have a big tech focus to their job and will have dealt with new economy companies,” he says. “Other banks don’t have that yet, so JPM will be more of a hunting ground that it has been in the past.”
The movement of investment bankers – including those based in Hong Kong – into corporate development roles at Chinese tech firms is unlikely to abate in the near future. “I think more bankers in Asia will make these moves, including juniors. Tech companies offer interesting work, pay competitive base salaries, and there’s more potential upside at a senior level if the company performs,” Jeff Chen, chief strategy officer of Chinese online healthcare firm WeDoctor and former head of APAC technology IBD at HSBC, told us previously.
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