HKSI Career Talk Series

An Insider View ofDeveloping Your Career in the Financial Industry

16 Nov 2007

Knowing our Strength

• Our strength as an international financial centre

– Location in the region & proximity to PRC

– Infrastructure

– Talent pool• Finance services as the pillar industry

of HK economy 6.2% GDP in 1985 => 12.8% GDP in 2005

• No. of practitioners grows steadily SFC licensees: 20,201 in 2003 => 32,208 in Sep 2007

• HK licensing regime – upholding the standards of practitioners

Grooming of Talent

• HKSI is a professional and examining body, dedicated to grooming new talent and contributing towards building a professional work force within the local finance industry through the following initiatives:

– HKSI Sponsorship Programme

– Jobs2Click (online recruitment service)

– Membership services (professional development of new entrants)

– HKSI Career Talk Series (provide useful and practical guidance)

• Senior industry practitioners or the Insiders regularly share their real-life experience & provide advice to those seeking a career in Financial services.

Asset Management - the Opportunities Ahead

Ms Samantha Ho (MHKSI)Member of HKSI Membership CommitteeInvestment Director of INVESCO Hong Kong Ltd

Number of Licensees / RegistrantsTable C1 - Number of Licensees / Registrants 表 C1 - 持牌人 / 註冊人數目

Licensed Corporations (LC) 持牌法團

Registered Institutions (RI) 註冊機構

Licensed Representatives (LR) 持牌代表

Responsible/ Approved Officers (RO/AO) 負責人員 / 核准人員

As at end 截至

SEHK Participants 聯交所參與者

HKFE Participants 期交所參與者

SEHK/HKFE Participants聯交所/期交所參與者

Non-Participants 非參與者

SEHK Participants 聯交所參與者

HKFE Participants 期交所參與者

SEHK/HKFE Participants聯交所/期交所參與者

Non-Participants 非參與者

SEHK Participants 聯交所參與者

HKFE Participants 期交所參與者

SEHK/HKFE Participants聯交所/期交所參與者

Non-Participants 非參與者

SEHK Participants 聯交所參與者

HKFE Participants 期交所參與者

SEHK/HKFE Participants聯交所/期交所參與者

Non-Participants 非參與者

Total 總計

2003 452 123 3 740 0 0 0 98 7,350 421 150 8,455 1,173 44 14 1,178 20,201 2004 436 116 9 736 0 0 0 97 7,660 398 424 9,875 1,157 52 44 1,466 22,470 2005 413 113 19 742 0 0 0 82 7,816 365 883 11,701 1,224 60 116 1,758 25,292 2006 408 112 23 769 0 0 0 88 8,153 423 1,195 13,643 1,207 63 125 1,930 28,139

2006 9/2006 409 113 23 751 0 0 0 86 8,081 404 1,178 13,348 1,183 64 126 1,843 27,609

12/2006 408 112 23 769 0 0 0 88 8,153 423 1,195 13,643 1,207 63 125 1,930 28,139

3/2007 411 111 23 787 0 0 0 93 8,293 433 1,257 14,124 1,241 63 130 2,067 29,033 6/2007 411 111 25 816 0 0 0 95 8,619 416 1,317 14,982 1,268 64 138 2,132 30,394 9/2007 415 112 26 840 0 0 0 98 9,137 405 1,454 16,021 1,317 72 139 2,172 32,208

Remarks: LC includes licensed corporations, deemed licensed corporations and temporary licensed corporations RI includes registered institutions and deemed registered institutions LR includes licensed representatives, provisional licensed representatives, deemed licensed representatives and temporary licensed representatives RO/AO includes responsible officers, provisional responsible officers, deemed responsible officers and temporary approved officers Source: Securities and Futures Commission 備註: 持牌法團包括持牌法團、當作已獲發牌的法團及短期持牌法團 註冊機構包括註冊機構及當作已獲註冊的機構 持牌代表包括持牌代表、臨時持牌代表、當作已獲發牌的代表及短期持牌代表 負責人員/ 核准人員包括負責人員、臨時負責人員、當作負責人員及短期核准人員 資料來源：證券及期貨事務監察委員會

• Provide quality control on investment team/process and introduce enhancements if appropriate

• Resolve cross-border issues and leverage best practice

• Risk management

• Ensure disciplined investment process is followed

• Coordinate research efforts, supervise investment team

• Provide regional overview and strategy directions

• Coordinate portfolio construction and implementation within the context of a specific mandate

• Monitor and ensure synchronization buy/sell decisions

• Macro-economic research/liquidity analysis

• Specific country and portfolio responsibilities

• Stock research and analysis Monitoring List and Country Models

• Risk and performance attribution analysis / investment team IT

• Best execution within compliance/audit structures

1. Head of Investments, Asia Pacific Region

2. Chief Investment Officer

4. Risk and Performance Analysts

5. Centralized Dealing

3. Fund Managers

Responsibilities – Asian Investment Team

Top Down Country Allocation Process

TechnicalLiquidityMarket

Accessibility

CurrencyUS$

€¥

Interest RatesUS

EuropeJapan

TechnicalFund FlowCommodity

External Factors

Bull Bear Profile

Political Country RiskGovt Policy

EconomicGrowth

CPI, i rateM Supply

Trade, C/AFX

Regional Factors

Asset Allocation (% Equity % Cash)

ValuationAbsoluteRelative

Yield Gap

Market Outlook

US EquitiesUS Bonds

GrowthEarnings

EPS Trend

Cash Level

Regional Ranking

EconomicGrowth

USEuropeJapan

Country Allocation (100% Equity)

Investment Process - Overview

Country Allocation

Model Portfolios

Stock Selection

Stock Selection Process – Research Execution

Fundamental Stock AnalysisValuation•P/E (prospective), PCF, PFCF•Premium or Discount to NAV•DDM, ROE•Relative to historic, sector, market

Liquidity• Days to get in/out• Total turnover• Facilitates asset allocation

Management/ Franchise Value Determination• Management and Ownership• Quality of Earnings • Balance Sheet • Product

Earnings Growth•Growth in EPS•Growth in Market Share•Origin of Growth

(Organic, new project, asset injection)

Buy/Sell

CatalystsIdentification

PriceTarget

• Transparent and Disciplined Investment Process

Business Sustainability-Relative Position on Food Chain-Value creationGrowth Assumptions-Normalized ROE-Normalized Payout ratioTakeover Value- Private market- Management buyoutCatalysts-Management-Industry-TechnologyTarget Price

Identify Stock

First Cut Analysis

Company Visit

Detailed Analysis

Prepare Report

Peer Review

Portfolio

Screening:- PBV Historical- EPS Changes- Growth- DividendResearch-Internal-ExternalMonitor ListSDRN

Financial-ROE, ROI-Cash-flow-Balance SheetValuation-DDM-PER, PCF, PBV-Sector relative-Country relativeFranchise ManagementGrowth

Management-Integrity-Capability-Product

Business Model-Value Chain Analysis-Industry Food Chain-Product AnalysisMacroeconomic IssuesUpdate:-Growth assumptions - ROE Cycle-Financial Analysis-Management-DDM-Price Implied GrowthIdentify Catalysts

Stock ChecklistTarget Price

Critique-Business Model-Growth Assumptions-Discount AssumptionsIdentify-Confirmation Bias-Accessibilty Bias-Representation Bias

Free Cash-flowLeverageROE > WACCSustainable Growth- At least 15%

Identify MissedAssumptions

Key Output

PortfolioDiscardKey Considerations

Stock Selection ProcessSTEP 3 – STOCK ANALYSIS

For illustrative purposes only.

• Set performance and risk objectives

• Set risk budget for portfolios

• Monitor portfolio holdings, tracking error, active stock, sector and country bets through BARRA and FactSet reports

• Monitor portfolio active TE contributions, stock liquidity

• Monitor portfolio performance vs benchmark and peer group

• Review performance attribution analysis

• Review portfolio realized TE vs target TE

• Monitor portfolio characteristics

• Ensure product integrity

• Quarterly portfolio review

1. Risk Budgeting

2. Risk Monitoring

3. Performance and Risk Management & Review

Risk Management

Process Description

Overview of Operations FlowOPERATIONS

Fund manager- Make investment decisions- Create orders

CentralDealing Desk

- Execute orders with brokers- Ensure best execution

Settlement

- Confirm trades- Send settlement instructions to custodians

Fund Accounting- Cash management- Asset reconciliation- Fund valuation and pricing

Compliance- Monitoring conduct of the firm and employees- Monitoring investment guidelines- Providing advice and direction on compliance with and interpretation of relevant regulations- Developing compliance manual

Investment Banking - the entrance and keys to success

Mr John Williamson (MHKSI)Director of HKSI BoardChairman of HKSI Membership CommitteeChief Financial Officer of Search Investment Group

Career Options

• Some high-powered jobs, such as those in investment banking, demand long hours.

• Other roles, such as Business Support, are becoming increasingly demanding.

• There are jobs for specialists: – IT

– Legal

– HR

– Finance

– Operations

Fund Managers

Compliance Officer

Private Bankers

Portfolio Manager

Traders

Operations Staff

Research Analysts

Risk Managers

• In short, whatever your degree subject, if you want to work in the financial services industry and have the necessary skills and personal attributes, there is likely to be a job for you.

Investment Banking

• Investment bankers often seen as the most glamorous people - key roles & high financial rewards.

• Work very long hours, enormous job pressure and must maintain the keenest awareness of risk management, stock market conditions, and economic trends.

• Investment banking spans a wide remit including:– corporate finance (raising capital for companies by issuing

shares or bonds);– mergers and acquisitions; – capital markets (trading in shares and bonds to make

money).

Corporate Finance

• What – Give advice to companies, institutions, and

governments about how best to raise finance. – Help their clients to implement and achieve the

desired results.

• Who– Many of those entering investment banking are young and highly ambitious; they have

a work hard, play hard attitude.– Graduates looking to go into corporate finance, debt capital, or equity capital will need

to be high academic achievers, capable of processing large amounts of information in a short space of time. Competition is high, but the rewards can be substantial.

– Firms recruiting in this area will be looking for team players - you will need to be resourceful, ambitious, and committed. The hours can be long and socialising is often done within the group, so it is important that you like your colleagues!

Team PlayersResourcefulAmbitiousCommitted

Mergers and Acquisitions

• What – advise clients as to which companies make good

takeover prospects or, alternatively, advise potential targets on how to avoid being taken over.

– Advice can range from simple strategic suggestions to detailed advice on how much to bid, how to finance the bid, and launching any counter-bid.

• Who– As a graduate, you will be involved in the financial analysis, looking at the

company’s profits, strengths, and other key factors, as well as undertaking preparation work such as checking documentation.

– You will also increasingly be involved in face-to-face meetings with clients, including chief executives & entrepreneurs from a wide range of companies.

– The hours in M&A can be horrific. As deals are closing, working weeks may exceed 90 – 100 hours. However, the financial rewards can be significant and international travel is commonplace.

Capital Markets

• What – A trading department where dealers buy and sell shares, bonds, and other assets

such as derivatives (futures and options). – The job is highly pressurised. Dealers buy and sell on behalf of clients and banks, to

maximize money or to minimise financial risk. – Teams of researchers will feed information to the dealer for making informed

decisions about whether to buy or sell. – A successful dealer needs a great deal of insight, good personal judgement and an

element of luck! – In volatile markets, trading becomes frantic and large sums of money can be made

or lost in minutes.

• Who– Graduates seeking to go into the trading

environment will need to have self-confidence, determination, be able to think on their feet and make informed decisions quickly.

What You Must Know Before the Interviews with Banks

• How Banks Are Organised and Structured

• The Top Ranked Banks

• What Qualities Banks are Looking for In the Interview Process

• What Qualifications You Need and How You Acquire Them

• Fundamental Valuation Techniques

• How To Get Invited to Interviews With Banks

• Why Choosing The First Employer Is Crucial For Your Future Career

• Increasing globalisation and use of information technology

• Structural changes in the financial sector

• More electronic transactions and outsourcing of functions

• New and different forms of capital

• Investment in technology, media, and telecommunications

• Pensions gap pressure on investors

• Emerging markets

• Reputation and brand value

• Access to finance

The Future of the Financial Industry

GlobalisationOutsourcingNew formsBranding

• The sector will continue to attract able people who will, with the right combination of talent & hard work, find enormous satisfaction in the intellectual stimulation, teamwork, & financial rewards that the industry provides.

• New jobs in the financial sector may emerge, requiring more specialist skill in niche markets and a greater focus on added value and creativity.

• New and different forms of capital will dominate the investment scene, with greater mobilisation of individual wealth including private equity and more widely accessible start-up capital.

In the Coming 10 or 20 Years

• Global financial service institutions will require the right expertise to respond to these challenges, seeing the need to understand and respect the differences in the way markets operate, while applying universal principles to each.

• Forward-thinking financial institutions will generate market advantage and superior returns by taking a longer-term view on company performance, allocating capital towards activities which are more inherently sustainable, & providing innovative solutions to the issues of environmental degradation, social inequity, and climate change.

My Advice is …

• Think about your aspiration carefully…talk to others in the industry.

• Consider what kind of skills or talent you have …or want to develop.

• Learn about the history and developments of industry.

• Explore the sector(s) that interest you most.

• Decide how you are going to prepare yourself to succeed in this exciting but demanding industry.