Firing and hiring

April 1, 2011


By George Chen
The opinions expressed are the author’s own.

Today is April Fools’ Day, a rare opportunity to make fun of friends and colleagues with pranks and practical jokes. Ever ahead of the game, Goldman Sachs produced an amusing mistake yesterday making it look more than a little foolish, as many investors and rival bankers may attest.

The bank’s Asia structured products unit said yesterday that trading in four index warrants it issued in relation to the Nikkei 225 was abruptly suspended in Hong Kong because of errors in supplemental listing documents. The formula of “cash settlement amount per board lot” for the warrants was misstated, Goldman Sachs Structured Products (Asia) Ltd said in a filing with the Hong Kong stock exchange. Click here to read the Goldman Sachs statement (PDF).

Before being suspended, the warrants surged by between 130 and 1,077 percent on Thursday morning, which local media reported could cost the bank millions of dollars.

Well, I understand it’s still a small figure to a bank like Goldman Sachs, although the story was certainly the most widely talked about matter in the equities world yesterday. Traders said this was a rare mistake that once again raised concern about the understanding of banks in relation to sophisticated financial products.

I am a bit worried about the fate of the Goldman Sachs bankers responsible for those Nikkei warrant errors. Should they be fired? Perhaps. It’s indeed embarrassing for Goldman Sachs and the timing is perfect — a day before the Fools’ Day — although this, sadly, was not a joke.

Or am I worrying excessively? The financial crisis is apparently over and there are good days ahead for investment banking professionals — at least those who work on China matters. Swiss bank UBS, the Asia-Pacific leader in equity underwriting, plans to double its China headcount over three to four years as it expands stock research coverage to small and medium-sized companies in China, the bank’s co-chief executive for the region said on Thursday.

Chi-Won Yoon, co-chairman and co-chief executive of UBS in the region, said at a forum in Hong Kong yesterday that the next real growth area for UBS in China would be small to medium-sized companies. I think this makes a lot of sense.

After the huge IPOs from the likes of Agricultural Bank of China in Hong Kong, we may not see many $10 billion and $20 billion deals for a while. Bankers are now talking about how “small is beautiful”, making deals and fundraising more workable and affordable to investors. Private businesses in China already contribute far more than half of national GDP growth annually.

But let’s not rush. I’m happy to teach Goldman Sachs bankers an old Chinese saying: “More haste, less speed” (欲速则不达 yu su ze bu da), as I believe a lesson should be taken from yesterday’s foolish mistake. The news of UBS hiring more China researchers should make rivals nervous.

After all, the financial industry is still short of talent, especially China experts. So is the media industry. A banker friend once asked me, these days if you know China, you speak Chinese and you have good communications skills, why not be a banker rather than a journalist and earn more money?

Good question.

George Chen is a Reuters editor and columnist based in Hong Kong.

Photo: Goldman Sachs Chairman and CEO Lloyd Blankfein testifies before the Senate Homeland Security and Governmental Affairs Investigations Subcommittee hearing on “Wall Street and the Financial Crisis: The Role of Investment Banks” on Capitol Hill in Washington April 27, 2010. REUTERS/Jason Reed

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China is facing a US consumer backlash. If I were a Chinese exporter, I would be very worried.

Posted by M.C.McBride | Report as abusive