Morgan Stanley, facing the headwinds of China’s market volatility, has initiated workforce reductions, cutting approximately 9% of its asset management unit staff in the country. The move, impacting about 15 employees, comes as the Chinese market experiences a downturn, impacting the prospects of the $3.8 trillion fund sector.
Morgan Stanley Investment Management China began the downsizing process in December, marking the first instance of staff cuts since acquiring full ownership of its China fund unit in 2023. The unit, rebranded as a wholly-owned subsidiary in June, has been affected by the prolonged economic challenges in China.
The broader challenges faced by global financial firms, such as JPMorgan and BlackRock, in the world’s second-largest economy are highlighted by the downsizing at Morgan Stanley. China’s CSI300 index recently hit five-year lows, and the financial sector, including investment banking, is facing a challenging outlook.
Morgan Stanley’s move is reflective of the subdued growth in China’s onshore fund market, which saw a mere 6% increase in assets last year, following a 1% rise in 2022. The weakening Chinese market has led to significant redemptions from actively managed equities funds.
Morgan Stanley IM China, based in Shenzhen, witnessed a decline in assets under management, recording a 53% plunge from its peak in June 2021 to 19.8 billion yuan ($2.75 billion) at the end of 2023. The unit reported operating losses of 48.5 million yuan in 2022 and 23.2 million yuan in the first half of 2023.
As part of its strategic initiatives after assuming full ownership, Morgan Stanley IM China appointed a Chief Investment Officer, Alex Zhou, to steer the investment business. The headcount reduction is part of the ongoing recalibration of the business, addressing weaker fundraising prospects amid market challenges. Observers suggest that foreign firms might be implementing changes in China units as part of broader cost-cutting measures.
