Are you quite bullish on prospects?

Morrice:Yes, the increase in debt issuance across the region is obviously positive for us. The volatility is also very positive because it forces investors back into the marketplace and means they have to think about liability management and rates of return. Plus there are a lot of new products becoming popular in the region, such as next generation CDOs; growth in some business areas, such as commodities; and an increased interest in forex. So it bodes well.

Have you been hiring on the derivatives side?

I have been running our Asia Pacific business for about two-and-a-half years now. For the first 18 months, we spent quite a lot of time working on our strategy. Since mid 2003, we have been making quite a lot of senior hires, a process that's accelerated recently. We have a new head of forex, Steve Weller, who is based in Singapore, and we'll hire someone senior in foreign exchange in Japan. We hired a new head of structured credit, Eric Slighton, (based in Hong Kong), who came from Deutsche. Last year, we brought over a managing director from Europe, Justin Bull, who now runs our regional sales business from Hong Kong. With Justin's focus on this area, we expect our Asia Pacific sales force to double over the next year. On the trading side, we plan to make some senior hires in the next few months. Overall, our headcount went up 10% from the end of 2002 to 2003. We anticipate an increase of a further 10% to 15% this year.

On top of that we're building an international infrastructure hub in Singapore, which will create between 300-500 jobs. This hub will support Barclays Capital on a global basis. So within two to three years we'll have doubled the headcount in the region and be close to 1200.

We're planning for the future. We have a big investment plan and are excited about the opportunities we see in Asia.

Has it become a tighter hiring market?

It is very difficult to find very good senior people in Asia. There just aren't many of them. And it has got more expensive to hire in the lower ranks than it was a year ago. When you see houses such as Merrills and Goldman coming back into the hiring market that always makes things tighter. It will remain tight for a while.

So the days of guaranteed bonuses are back?

Yes they are. It's just a question of for how long!

Will the bond business turn down when interest rates go up?

No, we'll see increased issuance as the Asian economies continue to expand. The borrowers are much more sophisticated than they used to be and are much more used to hedging. They don't take as much direct interest rate risk as before. Plus there's a significant capex need around the region, as well as a lot of bank capital requirements.

How does the loan business fit into your strategy?

Our loan business is tactical. We use it with our best clients. We use it in large acquisitions-type transactions. But we don't tend to do loans for the sake of loans. So you'll see our position in the loans league tables has lagged.

We sell down aggressively, and don't have a very big loan book in the region. Traditionally that model has worked for us. So we use the balance sheet sparingly, where we have a strong relationship.

What's your outlook on Japan? Has it turned the corner?

Two or three months ago we were one of the first houses to say deflation was over. Everything we've seen since then backs up that view, although we feel there's a long way to go. The economy does feel better. The corporates are doing very well and have restructured so many times that they are very well positioned even with lower exchange rates. They are okay with dollar yen at 100. But if it goes below 90 that will be a problem.

Plus the impact of interest rates going up would have some benefits - it will lead to improved earnings for insurance companies and banks.

What's your outlook on China and how will that impact the region?

We expect China to grow more slowly. That will no doubt have effects across the region. And there is a lot of work to do before the Chinese could consider floating the currency. The market is taking a more realistic view of China's prospects now and that is a good thing. We are going to open up a bank branch in China as soon as we get approval. But we are taking a very cautious view of how long we think it will take us to make money.

There has been a bit of a dollar rally. Do you see Asian currencies appreciating?

We expect the Indian rupee to strengthen in the medium term. We have mixed views on the won and the direction of yen will be key to its direction. On dollar yen I am not so sure we are going to get through 105 and stay there for very long. But I think most of the Asian currencies will tend to strengthen.