Barclays Capital announced last week it will lay off 400 employees globally. While the bank said it is mostly to affect back-office operations and no front-line investment bankers will lose their jobs, the move raised questions out here in Asia, where the bank has continually positioned itself as trying to grow its business.
“We are building on our existing platform of equity-linked products and derivatives; we are seeking to build an equity capital markets platform focused on very high-quality execution and high-intellectual value research,” said Andrew Jones, the bank's co-head of global finance and risk solutions for Asia Pacific.
Last week the firm brought on board Jorge Munoz and Marco Schwartz as co-heads of equity capital markets in the global finance and rsk solutions group for the investment banking business in Asia Pacific. Munoz joins from Deutsche Bank where he was head of equity syndicate Asia Pacific since 2003. He has worked on more than 100 equity transactions in the region, including the record IPO for ICBC (China). Schwarz was responsible for UK and financial institution group coverage in equity capital markets for Europe, the Middle East and Africa. His recent notable transactions include the 2010 capital increases for SMFG (Japan) and Resolution (UK).
A Barclays Capital spokesperson declined to give any comment on the job cuts.
Barclays Capital, the investment-banking arm of the UK's Barclays, said it will strengthen its equity capital market business in Asia Pacific as the bank's optimism grows on corperate earnings and market demand for new equities.
Barclays Capital isn't alone. Several financial institutions have indicated they plan on expanding investment banking services in Asia, which has been and is likely to continue to be the world's most active IPO market in 2010. Seven out of ten of the largest new share sales in the world so far this year were made by Asian companies.
And Barclays Capital has room to grow; it only has a small market share of the region's ECM business. The bank is ranked No. 69 in terms of equity deals in Asia-Pacific excluding Japan so far this year, according to Dealogic. It has a total deal value of $260 million from three equity transactions. Compare that with the leader, UBS, which boasts a deal value of more than $10 billion from 50 transactions, and you see how far they have to travel to be in the big leagues.
“It’s too early to compare ourselves to established firms but we clearly have had early success that we are looking to build on,” Jones said in a phone interview with FinanceAsia.
Jones said the equity investment will continue to rise. “Asia-Pacific issuers are still seeking access to international capital, particularly in the US,” he said.
However, some analysts are bearish on the secondary market of Asian equities in the next few quarters. “Asian equity markets have gone nowhere for the past 11 months. Asia's long-term story remains a good one, but we don't see any catalyst for a big market rebound over the next few quarters,” said Gary Evans, global head of equity strategy at HSBC.
“Cleary the global equity markets have been volatile this year, however, I think that they remain an attractive avenue for funding for Asian corporates. The ability to access liquidity is helped by the fact that international investors are very positive on Asian markets and the region’s healthy corporate growth forecasts,” Jones said.
