Investment Banking, Hong Kong Edition: The Best Place to Bank If You Know Mandarin?
If you take a second to look at the demographics for this site (see: right image), it’s no wonder that there’s so much interest in Hong Kong.
We’ve featured a few interviews with readers who worked in other areas of finance there, but nothing specifically on investment banking – until today.
Continuing our recent trend of non-anonymous interviews, today we’ll be speaking with Michael Tanenbaum, who worked at the World Bank, JP Morgan in Hong Kong, and then started a very interesting service that you should sign up for right away if you’re at a non-target school and you want to break into finance.
Here’s what’s in store:
- Major differences in recruiting in Hong Kong and what types of candidates banks want to see there.
- Why “networking doesn’t work in Asia” is mostly nonsense and an excuse used to justify inaction.
- How deals, valuation, pay, and more differ in HK.
- Why you’ll have a much easier time applying to banks and investment firms in the future if you come from a non-target school.
Breaking In… as a Foreigner?
Q: Well, I guess everyone already knows your background, but let’s play this game anyway… how did you get into banking?
A: Sure. I went to Johns Hopkins and studied international Relations and Economics there – it was a great school, but not a target for banks, so I was at a big disadvantage for finance recruiting.
I enrolled in their Master’s program right out of undergrad and went to the School of Advanced International Studies (SAIS), specializing in China studies and international finance.
About then, I realized I wanted to work in finance and set my sights on investment banking.
Q: Right, but there’s a big difference between getting interested during this Master’s program and taking a few courses on China and then actually winning a full-time offer in Hong Kong.
How did you do it?
A: Two factors helped me the most:
- Mandarin language skills – These are pretty much required if you want to do banking in Hong Kong. I had studied it extensively in school and was already “proficient” by the time I was applying, though obviously I was not a native speaker.
- Interesting work experience – I had been CTO of a financial literacy non-profit and got a lot of leadership experience like that; I also had experience running a software project at the World Bank. Most people didn’t have anything quite like that, so I stood out.
And then there was the usual extensive networking and reaching out to alumni and anyone else I could find.
Also, note that I completed an internship in HK before working there full-time – going there full-time without a banking internship first would be almost impossible, especially with the competition these days.
Q: Yeah, that seems to be the consensus.
What was your experience with the recruiting process in Hong Kong? Is it more similar to North America or Europe?
A: It was definitely less structured than what you see in those places – lots of big banks have very different structures in Asia, and they might organize groups around regional coverage rather than industry coverage, so “industry groups” may not exist in the same way.
I’ve seen people here go through 15+ interviews sometimes (one American friend who won an offer as a sales-trader in Tokyo had to do that), so the process can be more extended and random.
Resumes/CVs and interviews themselves are not that much different because they’ll ask the same types of questions, and they look for and value similar experience.
I think the alleged differences in interview mentality are overblown because most senior people in HK have had lots of exposure to Western countries anyway.
They will definitely test your language skills in interviews, so you can expect everything from interview questions in Mandarin to being asked to translate newspaper articles.
One common problem that I’ve seen among interviewees is that they’re too demure and humble in interviews.
They don’t really know how to talk themselves up and describe their strengths and accomplishments, which (not to be racist) is definitely a cultural thing.
Another difference is that you cannot get a job in Asia without being in Asia – so if you have your heart set on Hong Kong, find a way to make the trip happen. Use Airbnb, stay with a friend, live in a hostel, and network your butt off to make it happen.
If you say, “But it takes too much time / money!” that really just means “I’m not committed enough to find the job I really want.”
Since I was at a non-target school, networking was essential for me and I met the guy who would ultimately become my boss on a career trek that my school organized – we went out and visited Hong Kong and I stayed in touch with everyone I met there.
Q: Right, so it sounds like recruiting is more random and definitely requires in-person visits, but other than that the application process is similar.
What types of candidates are banks looking for there?
A: Most of the people in my analyst class were from US schools, and most of them were originally from mainland China or Hong Kong (or were ABCs) and had studied at top schools in the US.
Most front office jobs were similar: it was mostly people originally from China or HK who had attended the top schools in the US, UK, or Australia.
So yes, as one of the few non-Asians in my class I was definitely the exception!
Q: Yeah, I can see that. I want to circle back to one of the points you mentioned earlier, about networking in HK and how people say “it doesn’t work” to justify inaction.
Why is it effective despite what people often claim?
A: Yeah, I see this one a lot and always laugh when someone complains about it.
Reality check: Hong Kong is super-international and you actually stand a better chance networking with people there than in New York or London.
HK really only has 2 industries: trading (import/export) and finance.
And all the bankers and finance people hang out in the same places – even MDs and more senior people will be there.
So you can’t be afraid of going out and contacting people randomly.
They’re not stupid – an MD knows that a student calling him is looking for work, and some MDs will brush it off, some will be annoying or disparage you, and some will help you.
But you have to take it in stride and keep going until you find helpful contacts.
Now, in mainland China networking is a different beast and it mostly takes place over lots of binge drinking. And there are all sorts of other differences such as going through the right channels, not contacting more senior people at first, etc.
But in Hong Kong networking is even easier than it is in other financial centers, in my experience.
Q: Great. So before we move on, any final thoughts on recruiting?
A: The only point I’ll add is that you may want to have 2 different versions of your resume prepared, because at some banks 2-page resumes might be acceptable (banks based in Europe) while some banks (anything US-based) will prefer your traditional 1-page format.
You can use that page to describe your work experience, academic accomplishments, and anything else that makes you look better and confirms your interest in the region.
Banking in Hong Kong
Q: Yeah, good to point that out. I still think it’s better to stick to 1-page if you’re only using one version but sometimes the extra information can help.
What about the investment banking industry in Hong Kong overall? What do you see in terms of deals and industries?
A: Sure. Basically, Hong Kong is the main hub for mainland China.
Private banking relationships have been all the rage here because there are tons of newly wealthy people in the region who are looking to put their funds to use.
So lots of banks here stick it out and attempt to win private banking clients in hopes of cornering the ultra-wealthy market. As you’ve mentioned before, there’s also a lot of overlap between private banking and investment banking here.
The top 3 industries for deals:
Banking has been dominated by IPOs in the past because of the huge number of companies in mainland China going public, and M&A and debt deals tend to be less common. But eventually that will change and groups like DCM will mature.
The overall process for equity, debt, and M&A deals is not that much different but due diligence is huge and much more important than in the US and Europe.
Even if a company lists a number in its official filings, has the CFO sign off on it, and has accountants/auditors also verify it, that doesn’t necessarily mean anything.
You really have to double-check everything and assume that there will be at least a few shady happenings with most companies.
There is an IPO market but it’s nothing like what you see in developed countries. And there isn’t much activity in derivatives or DCM.
What about an average day in the life of a banker there? Are the hours actually much longer?
A: Yeah, I think so. Even the average office worker here tends to have longer hours than what you see in the US and Europe, so investment banking is even longer.
I think 120 hours per week is an exaggeration but I wouldn’t be surprised if the overall average is slightly here (of course, who doesn’t think they have the longest hours?).
It can also feel like a bubble at times because it’s a small place and you tend to go to the same spots over and over again – but then, you’ll end up going to different countries working on deals and if you somehow manage to get free time you can easily go off somewhere else for the weekend.
The perks are pretty similar overall, and the main benefit over working in the US is that you’ll get to visit lots of countries in the region (not just mainland China) for travel – banks do cover other places from Hong Kong as well.
Q: So what are some of the differences in those regions?
A: I’ve worked on deals in a few markets here – mainland China, Singapore, Indonesia, Korea, Japan, etc.
You might think that different accounting standards are a big issue, but that’s actually the smallest problem.
As an example, Indonesia has a very poor regulatory system and its largest businesses are dominated by a handful of powerful “families” with almost no corporate governance.
Then there’s huge FX risk, political and reputational risk, and more – lots of questions over labor standards, permits, companies falling out of favor with the government, and so on.
So you have to take into account all of that when analyzing companies in the region.
Then in a market like Japan, you have a series of other problems (massive debt, aging population, insolvent pension system, etc.) but you don’t have to worry about the yen disappearing overnight or the government being toppled by guerilla fighters.
Q: So how do you factor all of that into models and into valuations?
A: The same basic frameworks (comps, DCF) still apply but you have to assume much higher discount rates due to political risk.
And you have to assess the risk of a company failing, and whether or not the government will come along and bail it out.
Q: Sounds very similar to what you see in Latin America.
What about compensation in Hong Kong?
A: Well, you already know that the tax rates are much lower than in Western countries, though you don’t save quite as much as a US citizen since you’re still taxed on worldwide income.
Other than that, salaries and bonuses are relatively standardized at the junior levels so those aren’t much different from other regions.
I did not receive a housing stipend and didn’t get free round trips back home or anything – I’ve seen some people mention that, but in my experience they didn’t give any of that to junior bankers.
Senior bankers might get some of that, especially if they’re not from Hong Kong originally and are being asked to move there to start a new office or a new group for the firm.
Q: Ok, thanks for clearing that one up. What about exit opportunities? It seems like people work in Hong Kong and then move on or move out of the region very quickly.
A: Yeah, it is a more transient community here because people do leave and a lot of the people working here aren’t from the region originally.
The 2 most common paths to moving elsewhere:
- Do an internal transfer back home or to another region but stay at the same bank.
- Keep in touch and network when you’re back home or in other places and meet your counterparts in other regions and transfer like that.
Some people do move to the buy-side at firms here so that’s definitely possible, but I think more people actually transfer to other regions, with NYC and London at the top of the list.
One difference in Asia is that the opportunities can be greater for expats here – you stand out more if you’re not from the region, so sometimes firms are more willing to meet with you and hear you out than they would be in the US.
But it depends on the market and the country you’re in, and in some places the opposite is actually true.
Q: After leaving JPM you took a bit of a different path than most people – can you tell us about that?
A: Sure. I decided to leave and start ConnectCubed.
The idea is simple: finance firms are always looking to hire people, and we want to make the recruiting process more transparent and accessible.
While huge banks always use on-campus recruiting out of necessity, it costs a lot of money and time to sift through applicants and it also prevents smaller places from taking advantage of it.
At the same time, students from non-target schools have almost no access to these recruiting channels.
So we want to provide a filtering mechanism where the best students from anywhere can apply directly to firms – it removes a lot of the hassle of cold-calling and makes it easier for firms themselves to find the best people, even if they don’t look as good on paper.
Q: The benefit to applicants is obvious, but what do finance firms really get out of it? Don’t they already have too many people applying to them?
A: Global banks have a flood of applicants, which is why they need a better way to sort for the best and brightest.
And then smaller firms have serious trouble finding the right people because headhunters are expensive and it’s difficult to sort through applications and qualify people.
So it lets them find new employees with low costs and with the exact skills they need.
These firms tend to have very short hiring cycles and needed people yesterday – so using our service, they can find candidates with the exact characteristics they need.
Q: Awesome! Sounds like a great idea. Good luck, and I’m sure many readers will find this interesting.
A: Yeah, thanks again and I enjoyed the chat.
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