Across the board, China accounts for a larger proportion of both volumes and fees today than it has at any point in the previous six years. In the year to December 5, China is 85.7% of the ex-Japan Asia debt capital markets wallet, 82.1% of ECM and 52% of M&A, for an investment banking total of 76.6%.
The rise has been steady. In ECM, China was 50.2% of the pie for the same period in 2010 and has risen steadily every year since. In DCM, the number has moved around a bit more but has never been higher than today. In M&A, China was only 35% of the market as recently as 2014.
While the numbers might be surprising, the trend is not news, so with Dealogic’s help we decided to look a little deeper and see if the fee totals were being matched by volumes. This tells us some interesting things.
While China accounted for 85.7% of DCM fees, it is only 74.9% of DCM volumes. This suggests, surprisingly, that underwriting Chinese bonds pays better, on average, than those elsewhere in the region. The reverse is true in South Korea, for example, which accounts for 10.4% of DCM volumes year-to-date, but only 4% of fees.
In M&A, the situation is the other way around. China accounts for 65.3% of M&A volumes, but only 52% of fees. So here, in volume terms at least, bankers are earning less for the same work than they would elsewhere. The best example of the opposite trend at work is Hong Kong, which clearly pays a healthy rate in M&A: despite accounting for only 4% of volumes, it made up 8.6% of fees.
ECM is a closer match – China is 82.1% of fees, 81.3% of volumes. The data also reveals how relatively inconsequential India is as a market for investment banking, no matter how tremendous the country’s economic potential. Furthermore, it is getting worse. In 2010, India was 9.4% of DCM fees, 6.5% of ECM and 18% of M&A. In 2016, it is 2.2%, 2.4% and 9.5%. Overall it has dropped from 11.5% of Asia fees to 4.2% in the same period. Oddly, although India has a dismal reputation for fees, it is not that much worse than anywhere else: its 3.2% of DCM volumes, 3.9% of ECM and 9.4% of M&A is roughly in line with its fee contributions.
Indonesia, too, is a great economic hope with not much to show for it in public investment banking deals (although well-connected banks like Credit Suisse tend to make their money in the private markets). It ranks ninth in the region for DCM and M&A volumes, and eighth for ECM. That said, it is sixth for overall investment banking fees, suggesting that what little public work arises is at least relatively well paid.