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Morgan Stanley weighs cutting 7% of Asia investment bank jobs

HONG KONG - Morgan Stanley is considering a 7 per cent cut in its Asia-Pacific investment banking workforce, with China taking the biggest hit as deteriorating relations with the United States and weaker economic growth curb dealmaking, people familiar with the matter said.

The bank is likely to start communicating with affected bankers as soon as this week, with more than 40 jobs at risk, including those with the capital markets unit, one of the people said. Other divisions may also be slightly affected, the people said, adding a final decision on the number of job cuts hasn’t been made.

The cuts are part of Morgan Stanley’s plan to reduce about 3,000 jobs globally by the end of this quarter, which Bloomberg reported earlier this month would amount to roughly 5 per cent of staff excluding financial advisers and personnel supporting them within the wealth management division. Morgan Stanley has employed a bigger China team in Hong Kong than most of its rivals, making it vulnerable as deal activity slows.

The New York-based firm already axed about 50 investment-banking jobs in Asia by the end of last year after a plunge in deals, and a significant number of those were China-focused roles. The reduction was among the highest for Wall Street firms last year, people familiar said at the time.

A Morgan Stanley spokesman in Hong Kong declined to comment.

Multiple rounds of job cuts in quick succession are rare in Asia. At Morgan Stanley, the region has been contributing about 13 per cent to its group net revenue in the past five years, reaching US$6.7 billion (S48.95 billion) at the end of 2022.

Global banks that have long been bullish on the world’s second-largest economy are now trying to scale back, even though they consider the long-term opportunities too big to ignore. The enthusiasm for China’s re-opening has faded as escalating tensions between the world’s two biggest economies has damped sentiment.

Investors have also trimmed their bets on China’s stocks, and US-based long-only fund managers have been the dominant sellers of Chinese shares. US President Joe Biden aims to sign an executive order in the coming weeks that will limit investment in key parts of China’s economy by American businesses, people familiar with the matter said in April.

Morgan Stanley reported US$2 billion in first-quarter net revenue for Asia, a 2 per cent decline from the same period last year, compared with a 25 per cent drop for Europe, the Middle East and Africa, according to its latest filing. Asia delivered its third highest quarter ever, aided by the policy dynamics in Japan and the China reopening, the bank said on its earnings call with analysts last month. BLOOMBERG