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Morgan Stanley (MS) Axes China Unit Staff Amid Market Failure
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Morgan Stanley (MS - Free Report) has axed 9% of its employees at its asset management business unit in China as part of its broader plans to stay defensive amid the nation’s economic slowdown and market uncertainties. The news was reported by Reuters, citing two people with direct knowledge of the matter.
The job cuts started in December 2023. These have impacted almost 15 of Morgan Stanley Investment Management China’s employees to date.
This is the first time that MS has reduced headcount in its China fund unit since buying out its local partner’s 36% stake for $54 million in 2023 and rebranding the unit as a wholly-owned subsidiary in June.
According to company disclosures, Morgan Stanley Investment Management China’s assets under management have declined every quarter after reaching a peak in June 2021, resulting in a 53% decline by 2023 end.
Based on the earnings results of its ex-joint venture partner Huaxin Securities, the unit recorded an operating loss of 48.5 million yuan in 2022 and 23.2 million yuan in the first half of 2023.
In order to drive the unit, Morgan Stanley hired a chief investment officer, Alex Zhou, at the China unit for the first time.
The staff reductions and the hiring of Zhou are part of Morgan Stanley Investment Management China’s efforts to modify and revise the business after taking full ownership.
Notably, China’s prolonged economic sickness has resulted in a collapse of its stock markets, which has diminished prospects for its $3.8-trillion fund sector.
Last month, the benchmark CSI 300 index, which replicates the top 300 stocks traded on the Shanghai and Shenzhen exchanges, fell to five-year lows after sinking 11% in 2023. The China stock markets have been hit by the unparalleled debt crisis in the property sector and a lack of large-scale government stimulus.
Two decades after betting on China as the world’s biggest growth story, investors are pulling back billions of dollars from China’s actively managed equities funds.
Recently, the sentiment in the nation’s stock market has improved a bit after Beijing took measures to support the market and address the underlying economic issues. It has sought to put a floor under the share prices by pushing state-controlled funds to buy stocks, curbing short-selling and trading misbehaviors.
While the stimulus might result in some growth in the economy, a full stock market recovery requires a more forceful response to the property crisis.
More Job Cuts by Morgan Stanley?
Last month, the Wall Street Journal reported that MS planned to lay off hundreds of workers from its wealth management (WM) division, a move that is expected to impact less than 1% of the unit’s employees.
The move came as the investment banking giant, like several other Wall Street firms, seeks to reduce costs amid economic uncertainty and concerns regarding the trajectory of interest rate cuts by the Federal Reserve.
Morgan Stanley has been focusing more on its WM segment and less on the institutional securities segment (constituting trading and investment banking) over the past few years. This is because the WM segment is less dependent on the capital markets and is a less volatile revenue source.
The WM segment became an important profit-making unit for MS post the acquisitions of Eaton Vance and E*Trade Financial under former CEO James Gorman.
However, last year, the segment’s revenues were flat year over year.
The job cuts will be one of the first major moves by Morgan Stanley’s newly appointed CEO, Ted Pick.
Over the past six months, MS shares have gained almost 1% compared with the industry’s 13.2% growth.
Last month, CNBC reported that Citigroup (C - Free Report) is planning to reduce 51 job roles across its wealth segment in London. The move will likely affect 10% of its wealth segment workforce, comprising 485 employees.
The majority of the job roles being eliminated would range from the post of assistant vice president to the director level. The elimination is likely to involve 21 job roles in C’s private bank division.
The decision to eliminate job positions in the wealth segment comes as Citigroup aims to boost the unit’s returns after discouraging results witnessed in the last reported quarter. In the fourth quarter of 2023, the segment’s efficiency ratio rose to 99% from 92% in the year-ago quarter.
A chief operating officer of Citigroup stated, “The wealth business is continuing to identify areas to improve efficiency through structural changes and cost base reductions.”
In January, it came to light that BlackRock (BLK - Free Report) was planning to eliminate 600 jobs, accounting for 3% of the company’s total global workforce. The move is part of BLK’s efforts to streamline operations and adapt to a rapidly changing operating environment.
Despite the elimination, BlackRock remains positive about its growth prospects. By the end of 2024, the company expects to employ more workforce as it plans to expand certain parts of its business.
In a memo to its staff, BLK’s CEO Larry Fink and president Rob Kapito wrote, “We see our industry changing faster than at any time since the founding of BlackRock. And, perhaps most profound, new technologies are poised to transform our industry – and every other industry.”
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Morgan Stanley (MS) Axes China Unit Staff Amid Market Failure
Morgan Stanley (MS - Free Report) has axed 9% of its employees at its asset management business unit in China as part of its broader plans to stay defensive amid the nation’s economic slowdown and market uncertainties. The news was reported by Reuters, citing two people with direct knowledge of the matter.
The job cuts started in December 2023. These have impacted almost 15 of Morgan Stanley Investment Management China’s employees to date.
This is the first time that MS has reduced headcount in its China fund unit since buying out its local partner’s 36% stake for $54 million in 2023 and rebranding the unit as a wholly-owned subsidiary in June.
According to company disclosures, Morgan Stanley Investment Management China’s assets under management have declined every quarter after reaching a peak in June 2021, resulting in a 53% decline by 2023 end.
Based on the earnings results of its ex-joint venture partner Huaxin Securities, the unit recorded an operating loss of 48.5 million yuan in 2022 and 23.2 million yuan in the first half of 2023.
In order to drive the unit, Morgan Stanley hired a chief investment officer, Alex Zhou, at the China unit for the first time.
The staff reductions and the hiring of Zhou are part of Morgan Stanley Investment Management China’s efforts to modify and revise the business after taking full ownership.
Notably, China’s prolonged economic sickness has resulted in a collapse of its stock markets, which has diminished prospects for its $3.8-trillion fund sector.
Last month, the benchmark CSI 300 index, which replicates the top 300 stocks traded on the Shanghai and Shenzhen exchanges, fell to five-year lows after sinking 11% in 2023. The China stock markets have been hit by the unparalleled debt crisis in the property sector and a lack of large-scale government stimulus.
Two decades after betting on China as the world’s biggest growth story, investors are pulling back billions of dollars from China’s actively managed equities funds.
Recently, the sentiment in the nation’s stock market has improved a bit after Beijing took measures to support the market and address the underlying economic issues. It has sought to put a floor under the share prices by pushing state-controlled funds to buy stocks, curbing short-selling and trading misbehaviors.
While the stimulus might result in some growth in the economy, a full stock market recovery requires a more forceful response to the property crisis.
More Job Cuts by Morgan Stanley?
Last month, the Wall Street Journal reported that MS planned to lay off hundreds of workers from its wealth management (WM) division, a move that is expected to impact less than 1% of the unit’s employees.
The move came as the investment banking giant, like several other Wall Street firms, seeks to reduce costs amid economic uncertainty and concerns regarding the trajectory of interest rate cuts by the Federal Reserve.
Morgan Stanley has been focusing more on its WM segment and less on the institutional securities segment (constituting trading and investment banking) over the past few years. This is because the WM segment is less dependent on the capital markets and is a less volatile revenue source.
The WM segment became an important profit-making unit for MS post the acquisitions of Eaton Vance and E*Trade Financial under former CEO James Gorman.
However, last year, the segment’s revenues were flat year over year.
The job cuts will be one of the first major moves by Morgan Stanley’s newly appointed CEO, Ted Pick.
Over the past six months, MS shares have gained almost 1% compared with the industry’s 13.2% growth.
Image Source: Zacks Investment Research
Currently, Morgan Stanley carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Similar Moves by Other Finance Firms
Last month, CNBC reported that Citigroup (C - Free Report) is planning to reduce 51 job roles across its wealth segment in London. The move will likely affect 10% of its wealth segment workforce, comprising 485 employees.
The majority of the job roles being eliminated would range from the post of assistant vice president to the director level. The elimination is likely to involve 21 job roles in C’s private bank division.
The decision to eliminate job positions in the wealth segment comes as Citigroup aims to boost the unit’s returns after discouraging results witnessed in the last reported quarter. In the fourth quarter of 2023, the segment’s efficiency ratio rose to 99% from 92% in the year-ago quarter.
A chief operating officer of Citigroup stated, “The wealth business is continuing to identify areas to improve efficiency through structural changes and cost base reductions.”
In January, it came to light that BlackRock (BLK - Free Report) was planning to eliminate 600 jobs, accounting for 3% of the company’s total global workforce. The move is part of BLK’s efforts to streamline operations and adapt to a rapidly changing operating environment.
Despite the elimination, BlackRock remains positive about its growth prospects. By the end of 2024, the company expects to employ more workforce as it plans to expand certain parts of its business.
In a memo to its staff, BLK’s CEO Larry Fink and president Rob Kapito wrote, “We see our industry changing faster than at any time since the founding of BlackRock. And, perhaps most profound, new technologies are poised to transform our industry – and every other industry.”