Hong Kong Brokers Scale Back Operations

by Philip Morton, Investors Offshore.com

05 October 2001

Good news seems to be quite a rare commodity in the SAR at the moment, as several of the jurisdiction's leading brokerages have announced that they are scaling back their operations as a result of the economic downturn, and the Hang Seng bank has warned that the terrorist attacks in the United States have pushed Hong Kong one step nearer to its second recession in three years.

An internal memo circulated within the SHK Financial Group on Wednesday made the observation that 'reducing expenditures was no longer an option; it is a fact of life.' According to the Group's Deputy Chairman, David Hui, there will be a three tier wage cut programme, starting with directors and staff earning more than HK$50,000 a month, followed by a limited number of layoffs with the latter measure possibly affecting around 3% of the workforce.

SHK are not the only brokers in the jurisdiction who have been forced to make cutbacks, and the economic situation seems to be affecting both domestic and foreign brokers alike. In September alone, the South China Brokerage and Tai Fook Securities announced pay cuts and layoffs, and Dutch bank ING Barings, Japan based Nomura Securities, and DBS Vickers Securities have all recently been forced to scale back their Hong Kong operations.

Meanwhile, Senior Economic Research Manager at Hang Seng, Vincent Kwan Wing-shing has warned that Hong Kong is tipped to post negative economic growth this year, with the GDP growth over both the third and fourth quarters 'very likely to be negative.' 'Given the dramatic change in the external environment together with the increasing risk, the previous forecast will be hard to achieve,' he warned.

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