Opinion | 28-10-20

Hong Kong Market Update 2020

 

Introduction

Since our last update, markets all around the world have been getting busier as people get used to the “new normal” and Hong Kong, with its nexus with the Chinese market, benefits from being one step further through the crisis than many other jurisdictions. Fingers crossed that we continue to see these green shoots of recovery/activity progress into the end of 2020 and beginning of 2021, but in the meantime, we set out below our retrospective on the last six months or so.

 

Salary review / bonus payments and distributions

Given the uncertain market conditions, a significant number of firms, particularly UK-headquartered firms, deferred their annual salary and performance reviews earlier this year. Most of these firms decided to freeze associate level salaries, or at best giving a symbolic pay rise. The pain was shared at partner level, with many firms freezing or limiting partner drawings for an extended period. The general exception to this rule have been US practices, who, whilst imposing some partner drawings restrictions, have generally maintained the status quo when it comes to annual pay increases for associates.

 

Some firms have gone further - from March 2020 onwards, around 15 international firms asked their fee-earners to take a 10-20% temporary pay cut for 3-6 months.  Some, but not all, of these proposals included a drop down to a four-day week commensurate with the reductions.  Most firms have now restored or have set out their plans to restore (before the end of 2020) salaries to their full pre-COVID levels.

 

Generally speaking, the quantum of bonuses has not been affected, provided that objective targets, such as billable hours and/or collection targets have been met. Similar to previous years, most associate level lawyers have received an average of 0.5-2months’ worth of bonus payments. However, the timing/format of bonus payments has been impacted, with some firms deferring payment until later on in the year (in line with when the deferred salary/performance reviews are taking place) and others opting to split the bonus into two separate payments, with one being paid over the course of the summer and the second in the autumn. Given the fluidity of the situation and how quickly things have been changing, firms have been monitoring the situation and some of those who had previously intended to defer bonuses until October/November of this year have already paid them out ahead of schedule off the back of strong office performances in the interim. 

 

A small number of elite US firms have had a particularly strong year at a global level, some even improving on their previous year’s financial performance, despite COVID. This has led to, in addition to the ordinary year-end bonus, the distribution of a one-off “COVID bonus” of up to USD $40k to associates

 

People movements

Whilst global hiring freezes/increased bureaucracy have impacted associate level recruitment activity, we have noted some strategic hiring at partner level. In particular, within the leverage finance space as two heavyweight partners, Gary Hamp and David Irvine, returned to the UK (to Shearman & Sterling and Linklaters respectively). Subsequent partner moves in this area include Manas Chandrashekar joining Kirkland & Ellis from Latham & Watkins, and Andrew Bishop joining Latham & Watkins from White & Case.

 

We have also seen Osborne Clarke and Orrick cease their HK operations over the summer. Whilst some other firms, including Stephenson Harwood and Proskauer Rose have decided to shift the focus of their HK offering slightly for strategic reasons.

 

Leading US law firms continue to invest in HK. Further to the additions of litigation partners Brian Gilchrist and Elaine Chen in Q1, Gibson Dunn has hired TMT partner Connell O’Neill from Allen & Overy’s Sydney office. MoFo has also added investigations partner Chu Zhen following the departure of litigation partner Adrian Yip; and Alex Tao, formerly of A&O, has joined Milbank as a US securities partner.

 

Other notable mentions include K&L Gates bringing across Orrick’s former M&A and funds team; Loeb & Loeb adding a two partner private client team from Stephenson Harwood; and Baker McKenzie hiring partners into each of their TMT, PE and finance teams.

 

A more extensive list of partner moves can be found below, but in the meantime, if it would be helpful to discuss your hiring needs or the market in general at all, please do feel free to get in touch.