HONG KONG - When Mr Eric Li lost his job after his family office employer relocated away from Hong Kong, he knew he would be facing a tough job market. He had no idea how hard it would be.

Seventeen months on, Mr Li is still searching. The bills are piling up – nearly HK$60,000 (S$10,360) a month for rent and HK$1 million annually for his children’s education. The worst part though is the fear, and gradual acceptance, that this is not even rock bottom.

Just five years ago, finance industry professionals with Chinese expertise like Mr Li were sought after by companies from UBS Group to Citigroup.

Initial public offerings (IPOs) by companies like Xiaomi Corp and Meituan bolstered Hong Kong’s status as a financial nexus rivalling New York.

Their efforts helped to generate more than US$6 trillion (S$8.1 trillion) in market value of mainland Chinese companies listed in Hong Kong and the United States.

Now, US-China geopolitical tensions have fractured capital markets. Hong Kong IPOs have dried up as stock prices slump and economic prospects wane.

Chinese President Xi Jinping’s push to step up data security and financial market regulation has made it harder for Chinese companies to acquire assets or list overseas.

“I thought that China’s upward trajectory and the tighter ties between domestic and global financial markets were the norm – now I realise they might have been just blips,” said Mr Li, who has also worked at Citigroup. “That is a scary thought.”

Nowhere is that pain more pronounced than in Hong Kong, the centre of such deal brokering.

The damage is underscored by the barrage of layoffs by Wall Street companies, the retreat of global capital into the world’s second-largest economy and the city’s diminishing role as an international financial centre.

The number of non-entry-level finance workers looking for jobs in Hong Kong is “in the hundreds”, based on the applicants who work with recruitment executive John Mullally.

“It is a fragile enough market,” said Mr Mullally, managing director at Robert Walters. “There are more cuts to come.”

Goldman Sachs Group, JPMorgan Chase & Co and Citigroup have made several rounds of job reductions in Asia over the past 18 months.

One banker who was made redundant by Goldman Sachs said it led her and her peers to evaluate whether to stay in Hong Kong – and even the industry.

The drop in IPOs flowing from China means banks will need to consider restructuring across Asia because staff numbers that have risen through past hiring are no longer justified, she said.

Another took it a step further. After losing her job as an analyst at a global investment bank in 2023, Ms Yang, 24, spent months searching for work, lining up about 10 interviews at consulting, venture capital and private equity firms, without success.

With her HK$20,000 a month lease coming up, she decided to move back to the mainland to live with her parents and pursue a career outside of traditional finance.

“The competition is a lot more fierce than before,” said Ms Yang, who like others quoted for this article asked not to give her full name speaking about sensitive career matters.

“If you have one private equity job in the market, there will be hundreds of former bankers’ resumes flying through.”

The number of people licensed with the Hong Kong Securities and Futures Commission, a reflection of the number of finance professionals in the city, has dropped by more than 600 since the end of 2021, to 44,722 as at December 2023.

Slowing financial services activity is likely to weigh on Hong Kong’s economy, given that the industry accounted for about 23 per cent of gross domestic product (GDP) and 7.5 per cent of employment in 2022.

The city’s post-Covid-19 recovery undershot expectations in 2023, and Bloomberg Economics estimates that GDP growth will slow to 1.8 per cent in 2024 from 3.2 per cent in 2023.

IPO fund-raising in Hong Kong fell by 56 per cent in 2023 to HK$46 billion, the least since the dot.com bubble burst more than two decades earlier, according to data compiled by Bloomberg.

The number of listings slid by nearly a fifth to 67, and only 13 raised more than HK$1 billion, the data shows.

Private equity and venture capital investors have also been hit. The money raised by China-focused dollar funds plummeted 81 per cent in 2023 compared with 2021, according to data provider Preqin.

China-focused bankers have borne the brunt, spanning both sell- and buy-side.

Investor relations managers were also badly affected because their skills were less transferable, said Ms Charlene Yeung, executive director at recruiting firm Wellesley, which specialises in senior hiring.

“It is grim for sentiment,” said Ms Yeung. “This year looks like, and hopefully is, the rock bottom.”

Bankers should brace themselves for a minimum 20 per cent drop in compensation, and in some cases the reduction “can be very extreme”, she added.

Mr Mullally said the latest round of job cuts that came right before Chinese New Year focused disproportionately on managing directors and those one level below.

After looking at former colleagues who have been out of a job for more than a year, Henry, a debt banker working for a Chinese brokerage in Hong Kong, said even if his pay gets cut by 30 per cent to 40 per cent, he would accept it.

“I am worried I am going to get fired any day,” he said. “All our revenue drivers are paralysed.”

China’s economic and market malaise and a backlash against the financial industry is also making it tougher to relocate to the mainland.

Not everyone is convinced that the best days are over.

Mr Jonathan Slone, former chief executive of brokerage CLSA, said booms and busts have been an expected part of living in Hong Kong.

“Yes, the froth of the most recent bull market is gone for now,” Mr Slone wrote in a recent Financial Times column. “But Hong Kong will not only survive, but thrive as it always has.”

His opinion was echoed by another former managing director at an international bank, who said it was irrational to conclude that the downturn was structural instead of cyclical.

Now advising finance students, she tells them to toughen up and realise that dealing with market chaos is part of the job.

To stem a population decline, the government has introduced a talent pass luring more people to the city. About 59,000 such permits have been approved as at the end of February. The population rose 0.4 per cent in 2023.

Still, the sea change means some people will never see the world the same again.

“In the past I thought I was talented, top of my game. Now I know it was guo yun,” the job searcher Mr Li said, evoking a phrase gaining traction that loosely translates to the fortunes of a country. “Without guo yun you are nothing.” BLOOMBERG