Hong Kong: A busted flush or time to buy the dip?

I’ll begin by nailing my colours to the mast. I believe that hiring sentiment in Hong Kong will emerge from its current two-year-plus malaise stronger and with more purpose during the second half of 2025.

Despite this near 27-month market downturn, which appears set to outlast all other crises the city has faced over the last 30 years, there have been some fantastic roles coming to market that have been filled by talent already here in Hong Kong as well as from talent from all over the world. In my view, Hong Kong’s ability to attract (with open arms) and retain some of the best and brightest professionals post-COVID remains strong, despite the negative narrative often seen in the Western press. We won’t be the only business in town that is seeing a number of people looking to find their way back to Hong Kong after making the difficult decision to leave over the past 4-5 years. It remains a very special place. 

2025 has begun with whispers of optimism across the city, though the fundamentals have changed very little. So why are people feeling more optimistic about Hong Kong’s outlook when coming off the back of two particularly challenging years (certainly so for the recruitment sector)? What’s behind this increase in optimism other than blind hope? It’s nothing new for business leaders to start a new year with messages filled with optimism about what’s to come and that “this year will be better than the last”, but what is it that could make 2025 any different to what we witnessed for the past two years? 

The big picture 

Geopolitical tensions are likely to increase in 2025, no doubt presenting obstacles for the Hong Kong marketplace. However, favourable policy initiatives aimed at attracting talent, alongside an easing monetary approach in China could lay the foundations for Hong Kong to mitigate some of these headwinds and improve the confidence and hiring sentiment across the city. A consensus is building that the resurgence in initial public offerings in 2024 will continue throughout 2025, benefitting the hiring sentiment across the organisations and industries supporting this market. While firms are expected to maintain a cost-conscious approach (at the very least until H2), the improving capital markets outlook and anticipated improvement in the level of investment activity could drive demand for related talent. Hong Kong saw a 14% rise in its stock market capitalisation in 2024 taking it to USD 4.5 Trillion. Capital under management in the Private Equity sector reached over US$230 billion, 5% up on 2023 and the Hong Kong government seems committed to enhancing the PE space through tax incentives and initiatives aimed at improving liquidity.

Now back to recruitment… Client vs candidate dynamics. Could these change in 2025? 

The candidate-driven market (lots of roles in the market comparative to fewer candidates available) from late 2021 through to early Q4 2022 quickly transitioned to favour a client-driven market (fewer roles in the market and lots of available candidates), and it has continued as such from Q4 2022. Across this period, attrition rates remained low which has meant fewer roles coming to market. Low attrition, concerns about job security, slower-moving processes, and heightened cost considerations sometimes leading to underwhelming offers all combined and resulted in a slower-moving marketplace for talent. Given many candidates we speak with felt “lowballed” by either their existing or new employers over the last 2 years, the “coiled spring” of interest from candidates to move into a new role is a serious consideration for businesses to ponder as to how they plan to tackle this if the market does start to recover. Various catalysts could kick-start a change to this client vs candidate dynamic. One of which could be the building narrative around the potential for the Great Resignation 2.0 in 2025 as professionals often jaded, disillusioned or unsatisfied in their current role begin to reassess their priorities, what they want to do and so become more proactive in how they achieve this.

There are a myriad of things that have the potential to challenge the status quo of Hong Kong’s current client-driven market: new entrants, further strengthening of emerging parts of the market (such as digital assets, payments platforms or crypto), a strengthening appetite in private markets, regulatory changes, a compulsory “return to the office” mandate prompting job hunting… the list goes on. Time will tell if these sparks will be enough to ignite the recruitment engine, shifting the dynamic towards more roles entering the market and increasing competition for talent. 

What's past is prologue 

When we look through the optimism, it’s a picture we’ve seen before in Hong Kong. 

Previous crises and waning confidence have heavily impacted market sentiment and the performance of the Hang Seng Index. However, its recoveries have historically been both consistent and lucrative. Similarly, the historic share price of the listed recruitment businesses has similarly tracked those falls as well as those recoveries. In both cases, 50%+ drops from their peaks have been followed by strong triple-digit recoveries. The current downturn in Hong Kong has lasted longer than the recovery period from SARS, the Asian financial crisis and the global financial crisis in 2008. Are we soon to see a similar upswing to what we’ve seen on the past? Will the recruitment sector again correlate and ride that same wave over the coming years? Although the rearview mirror is always clearer than the windshield, history suggests that recovery is likely. 

A time to stand out 

The recruitment industry in Hong Kong has contracted over the past two years. Several firms have closed their operations, and many professionals have left the industry as headcounts have been reduced to match the seemingly relentless challenges of the market. However, the opportunity to stand out and raise the bar for clients and candidates has not been this significant since the tail end of the financial crisis. Recent net promoter scores and feedback I’ve taken personally from our clients would suggest some great work being done by our team. It’s a moment in the cycle where we can and want to add significant value. 

So... 2025? 

Data suggests there is a very gradual improvement in hiring sentiment, as evidenced by the number of new roles we were instructed on in the later part of 2024 and the opening weeks of 2025, along with the associated first rounds of interviews taking place. We will however only likely get a sense of where hiring sentiment is heading post-Chinese New Year. The data is certainly too limited to call any sort of recovery just yet, but maintaining momentum month on month, quarter on quarter could turn those whispers of optimism into a louder chorus this year in Hong Kong.

We still find ourselves in a VUCA world. Volatile, uncertain, complex and ambiguous. Businesses in Hong Kong, many of which proudly call it home, have needed to continually plot a course through these non-stop challenges. This VUCA backdrop will no doubt lead to more turbulence and obstacles to overcome before we punch through the clouds and into clear skies, but there are reasons to be optimistic for 2025. We just might need to remain patient for a little longer...