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(Corrects spelling in first bullet to “Morgan Stanley’s”)
Written by Serena Lee and Xie Yu
HONG KONG (Reuters) – Morgan Stanley has laid off about 9% of its employees in its wealth management business in China, two people with direct knowledge of the matter said. The surge in China’s stock market has clouded the outlook for the $3.8 trillion fund sector. .
Morgan Stanley Investment Management China began cutting jobs in December, affecting about 15 employees, the people said, requesting anonymity because they were not authorized to speak to the media. Ta.
The cuts are Morgan Stanley’s first job cuts in its China funds division since it bought a 36% stake in a local partner’s loss-making business in 2023 for about $54 million. The company rebranded the division as a wholly-owned subsidiary in June. .
Morgan Stanley declined to comment.
The downsizing underscores the challenges facing global financial firms, including JPMorgan and BlackRock, in the world’s second-largest economy as a prolonged economic downturn grips markets.
China’s blue-chip CSI300 index fell to a five-year low last month, after falling 11% in 2023, hit by an unprecedented debt crisis in the real estate sector and the lack of major government stimulus.
The downturn in the Chinese market has hit domestic investors’ appetite for investment, resulting in huge redemptions from actively managed equity funds.
Morgan Stanley’s job cuts in its China funds division have made the outlook for other China-related jobs in the financial sector, including investment banking, even more bleak.
Asset growth in China’s onshore funds market slowed to 6% last year, after increasing 1% in 2022, slowing from impressive annual increases of more than 27% in both 2020 and 2021.
“Play defensively”
Shenzhen-based Morgan Stanley IM China has seen its assets under management decline every quarter since peaking in June 2021, with the firm saying the fund’s assets are down 53% from their peak and expected to reach a peak in 2023 by the end of 2023. The total amount was 19.8 billion yuan ($2.75 billion). Disclosure.
The unit recorded an operating loss of 48.5 million yuan in 2022 and 23.2 million yuan in the first half of 2023, according to the financial results of former joint venture partner Huaxin Securities.
For the first time, the company has hired Alex Chou, chief investment officer of Morgan Stanley IM China, to helm its investment business. Mr. Chou previously served as Head of Equities at AIA.
The job cuts and Mr. Zhou’s hiring are part of Morgan Stanley IM China’s continued efforts to realign the business after taking full ownership last year, the people said.
One of the first two sources said a “defensive stance” amid weak funding prospects was also a key reason for the cuts.
However, Peter Alexander, founder and managing director of China consulting firm Z-Ben Advisors, said foreign companies may simply be reevaluating or reducing their China units out of a “policy of inertia.” Ta.
“It’s more about the pressure from headquarters to cut costs everywhere,” he said.
(1 dollar = 7.1987 Chinese Yuan)
(This article has been resubmitted to correct company name in first bullet point)
(Reporting by Selena Li and Xie Yu; Additional reporting by Kane Wu; Editing by Sumeet Chatterjee and Himani Sarkar)
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