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Daiwa becomes latest firm to cut jobs in debt trading

[HONG KONG] Japan's second largest brokerage Daiwa Securities Group Inc has become the latest financial firm in Asia to reduce presence in the region's debt capital markets by cutting jobs.

The Japanese firm has cut six jobs in its debt capital markets division in its Asia ex-Japan business, according to bankers with knowledge of the situation.

Departures include executive directors Larry Temlock and Zac Yu while Jonathan Jackson, the head of Asian debt syndicate ex-Japan was reassigned to London in December.

Daiwa's retreat comes after it quit equity warrants trading in December and one source familiar with the situation said the brokerage is considering exiting the equity capital markets business with job cuts likely to follow.

If it does drop trading in those instruments, the brokerage will be left with equity sales and trading, corporate finance, M&A and private equity businesses.

"The company is going back to what it was around in 2010 with broadly a sponsor-focused model, though the restructuring may be coming to an end," said one source familiar with the ongoing developments.

The restructuring, ongoing since 2013, has seen employee numbers at its Hong Kong office shrink from a peak of about 700 to around 300.

In a sign of how times have changed, the debt capital markets business was moved to Hong Kong from Singapore to capitalise on the growing opportunities from the mainland.

Daiwa did not respond to requests for comment.

The moves reflect the difficult market for investment banks as more stringent rules on capital have hurt profitability. Last month Barclays cut hundreds of jobs in a broad retreat from Asia that saw it exit Australia, Taiwan and South Korea.

Concerns over a global slowdown led by China, falling commodity prices and the spectre of rising US interest rates have halted the boom enjoyed by primary debt markets in recent years.

Issuance fell 12.9 per cent in 2015 to US$182.9 billion after three straight years of record volumes. Banks are predicting a further shrinkage in 2016.

Secondary market volumes have also fallen with Greenwich Associates reporting a 9 per cent drop in corporate bonds in 2015 compared to the previous year while rates trading was flat.