April 24 (Bloomberg) -- HSBC Holdings Plc, Europe’s biggest bank, will shut its stock-research and trading businesses in Japan, joining UBS AG, Goldman Sachs Group Inc. and Citigroup Inc. in a retreat from the world’s second-largest economy.

About 40 people from the equity business will lose their jobs, said two people familiar with the dismissals. The firings will amount to less than 5 percent of the 1,100 employees the bank has in Japan, Hong Kong-based spokeswoman Vinh Tran said in an interview. She declined to give an exact figure.

Foreign financial companies fired about 4,300 people in Japan in the 15 months through March, according to Executive Search Partners Co., as the economy heads toward its worst recession in 60 years. The nation’s benchmark Topix index slumped to the lowest since December 1983 last month, and trading by overseas investors has dwindled.

“The group is re-focusing on emerging markets,” said Lee Yuk-kei, a Hong Kong-based analyst at Core-Pacific Yamaichi International. “Growth potential in developed markets like Japan is almost non-existent. It doesn’t fit into their strategy.”

Foreign investors in Japan have divested 95 percent of the shares they bought since 2005, with net selling totaling 10.7 billion shares since July 2007, according to Bloomberg data.

London-based HSBC listed 10 equities analysts in Japan covering industries including autos, banking, insurance, technology and telecommunications in a March 31 research note. It had five in sales, four in sales trading and two in international sales, according to the note.

Goldman, Citigroup

“We’re migrating Japanese equity operations to Hong Kong,” said Tokyo-based spokesman Paul Allen. “We will continue to cover some Japanese companies using the HSBC global network, but we will not be doing research out of Tokyo.”

HSBC said April 21 it eliminated 100 positions at its Hong Kong private banking unit, which employed 1,200 people, as the global recession crimped demand for wealth-management services. It is also cutting 1,200 jobs in the U.K., it said last month.

UBS AG fired about 10 equity research analysts and economists in Tokyo in the first round of cuts to its research business in Japan, two people familiar with the plan said this week. Goldman Sachs, Citigroup and Deutsche Bank AG have also reduced equity research staff in Japan.

Morgan Stanley and Mitsubishi UFJ Financial Group Inc. said last month they’ll merge their Japanese securities businesses. Citigroup is in the process of auctioning off Japanese retail brokerage and asset-management assets, media reports have said.

To contact the reporter on this story: Patrick Rial in Tokyo at prial@bloomberg.net; Kotaro Tsunetomi in Tokyo at ktsunetomi@bloomberg.net

Last Updated: April 24, 2009 02:20 EDT