Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

Morgan Stanley cuts 9% of China fund unit staff amid market rout, sources say

Published 03/06/2024, 03:03 AM
Updated 03/06/2024, 04:50 AM
© Reuters. A sign is displayed on the Morgan Stanley building in New York U.S., July 16, 2018. REUTERS/Lucas Jackson/File photo
USD/CNY
-
CSI300
-

By Selena Li and Xie Yu

HONG KONG (Reuters) -Morgan Stanley has laid off about 9% of its staff at its asset management business unit in China, two people with direct knowledge of the matter said, as the country's spiralling stock market dampens prospects for its $3.8 trillion fund sector.

Morgan Stanley Investment Management China started reducing headcount in December and the move has impacted about 15 employees, the people said on condition of anonymity as they were not authorised to speak to media.

This would be the first time Morgan Stanley has cut staff at the China fund unit since it bought out its local partner's 36% stake in the loss-making business for about $54 million in 2023. It rebranded the unit as a wholly owned subsidiary in June.

Morgan Stanley declined to comment.

The downsizing underscores the challenges that global financial firms, including JPMorgan and BlackRock (NYSE:BLK), face in the world's second-biggest economy as a protracted economic malaise batters markets there.

China's blue-chip CSI300 index sank to five-year lows last month, after having lost 11% in 2023, pummelled by an unprecedented debt crisis in the property sector and a lack of large-scale government stimulus.

The weakening of the Chinese market has hit local investors' appetite, resulting in massive redemptions from actively managed equities funds.

The job cuts by Morgan Stanley in the China fund unit adds to the dour outlook for other China-focused jobs in the financial sector including investment banking.

China's onshore fund market saw a muted 6% growth in assets last year after a 1% rise in 2022, slowing down from a staggering annual jump of more than 27% in both 2020 and 2021.

'PLAY DEFENSIVE'

Shenzhen-based Morgan Stanley IM China saw its assets under management decline every quarter after reaching a peak in June 2021, with assets in its funds plunging 53% from the peak to 19.8 billion yuan ($2.75 billion) at end-2023, according to company disclosures.

The unit recorded an operating loss of 48.5 million yuan in 2022 and 23.2 million yuan in the first half of 2023, earnings results of its former joint venture partner Huaxin Securities showed.

The U.S. firm for the first time hired a chief investment officer at Morgan Stanley IM China, Alex Zhou, to steer the business. Zhou has previously worked at AIA, where he was head of equity.

The headcount reduction and hiring of Zhou are part of Morgan Stanley IM China's initiatives to recalibrate the business after taking full ownership, a third source with knowledge of the matter said.

One of the first two sources said to "play defensive" amid weaker fundraising prospects was also a key reason for the cuts.

Sentiment in China's stock market has improved since March after Beijing undertook a raft of measures to revive confidence, including fresh curbs on short-selling and a crackdown on trading misbehaviours.

In a research note last week, Morgan Stanley said it believed "the massive global fund outflows we saw throughout the past several quarters has largely completed".

Peter Alexander, founder and managing director of China consultancy Z-Ben Advisors, said foreign firms might just be rolling out overhaul or cuts in China units out of "policies of inertia".

© Reuters. A sign is displayed on the Morgan Stanley building in New York U.S., July 16, 2018. REUTERS/Lucas Jackson/File photo

"It is more about pressure from the headquarters to reduce expenses anywhere and everywhere," he said.

($1 = 7.1987 Chinese yuan)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.