INVESTMENT FOCUS-Recruiters' shares may face further pressure

* Recruitment firms' shares down 12-19 pct in two months

* Huge job cuts to increase supply of people seeking jobs

* Recruiters also face competition from likes of LinkedIn

By Atul Prakash

LONDON, Oct (HKSE: 3366-OL.HK - news) 23 (Reuters) - Job cuts announced by banks such as Credit Suisse (LSE: 0QP5.L - news) and Deutsche Bank (Other OTC: DBAGF - news) and a likely slow pace of job changes before the February-March bonus season may put further pressure on shares of recruitment companies, an analyst said.

Shares (Berlin: DI6.BE - news) in companies such as Adecco (VTX: ADEN.VX - news) , the world's biggest staffing group, Randstad the second largest, British firm Hays (LSE: HAS.L - news) and white-collar recruiter Robert Walters have fallen between 12 percent and 19 percent since early August after a long period of strong gains.

The pan-European FTSEurofirst 300 index has fallen 6.6 percent during the same period.

Some of the firms said the share price weakness was mainly due to worries about global economic growth.

"It (Other OTC: ITGL - news) 's not a great environment for firms like Hays as job culls planned by major banks will creates more supply of people than available jobs, hitting their sales and margins from the cut in both temporary and permanent staff," Edmund Shing, global head of equity derivative strategy at BNP Paribas (Xetra: 887771 - news) , said.

"Things become more complicated before the bonus season in February-March as hiring companies and employees prefer to wait until the payout of cash bonuses."

Credit Suisse said this week it will cut the number of its staff in Switzerland by a net 1,600 in three years, and will lower the number of its investment bank staff in London. Sources told Reuters last month Deutsche Bank aims to cut about 23,000 jobs through layoffs,

However, recruitment companies said they were confident about their prospects. Hays reiterated its comments that it had had a good start to its new financial year and remained focused on driving profitable growth in its business.

Adecco and Robert Walters (LSE: RWA.L - news) were not available for comment.

Arun Rambocus, director of investor relations at Randstad, said the announcement of job cuts by banks might hit some specialised recruitment firms but it was not a major player in the banking sector. "Shares of the companies in the recruitment sector have recently fallen mainly because of macroeconomic worries in a broader sense," he said.

INTERNET COMPETITION

KBC Asset Management nonetheless was betting on a recovery in the European job market.

"We have a contrarian view on the sector and think that things are improving for the recruitment companies," said Ronny Claeys, senior strategist in Brussels.

"Job markets in several countries such as the United Kingdom and Germany are getting tight, but we are still seeing some weakness in France and southern Europe."

Analysts said the recruitment companies typically make more money in an environment of ample available jobs and fewer people chasing them as they charge a higher fee from hiring companies which have struggled to find the right candidates.

According to Thomson Reuters StarMine data, analysts revised down their 2016 earnings per share (EPS) estimates for Hayes and Randstad by 5.4 percent and 2.9 percent in the past month.

Markit (NasdaqGS: MRKT - news) data shows investors' short interest - borrowing stocks to sell in anticipation of buying back at a lower price - in firms such as Adecco, Robert Walters and Michael Page have slightly risen in the past weeks.

Analysts said that recruitment companies also faced competition from Internet-based companies, with both hiring companies and people seeking jobs having several other, sometimes more direct, options, especially in the lower and mid-tier job markets.

"Recruitment firms are facing a lot of competition from firms like LinkedIn, which directly connect hiring companies with their potential employees. It's a trend which could hurt recruitment companies going forward," said Manish Singh, head of investment services at Crossbridge Capital. (Additional reporting by Sudip Kar-Gupta; Editing by Alison Williams)