1. Recruitment
One of the best indications of how a market is going is the recruitment trends. And if the latest Hudson report is anything to go by, most sectors across Asia should expect a heady year.
In line with expectations, Chinese operations will be the biggest hirer with 68% of them predicting that they will be increasing headcount. In Hong Kong 52% of employers plan to add to their numbers, while in Japan 58% expect a rise in employee numbers.
The corollary of increased hiring and growth is a candidate shortage. For law firms nowhere will that shortage show up more than for capital markets and corporate finance lawyers with Mandarin skills as China continues to demand everyone's attention.
That increased demand will see clients continue to lure young lawyers in-house; as compliance requirements (particularly for listed companies) go up, so to does the worth of the in-house lawyers.
Recruitment trends: key points
63% of firms expect to increase headcount in 2006
The legal sector has the highest level of turnover
Highest staff turnover is in Singapore where 93% of companies had turnover in the last 12 months
Firms have forecast salary increases of 15% or more

2. PRC firms on the move
King & Wood has already signaled its intentions vis-à-vis the Hong Kong market: it has the strategy of pursuing a full financial merger with its Hong Kong partner, Fong & Ng.
In 2006 expect more PRC firms, such as Jun He, Commerce & Finance, Jingtian & Gongcheng and Haiwen & Partners, to eye up Hong Kong. The lure of advising on HKSE work for their clients - for both the HK and PRC end - makes the move of Chinese firms into the old British colony unstoppable.
At the same time, the Chinese bar won't be opening up its domestic markets to full international competition for some time yet - or at least not until it has a phalanx of highly-trained young lawyers that have spent substantial time at the finishing schools of City or Wall Street firms. When they are ready to compete on what they consider to be equal terms, that's when full competition will begin.

3. Commoditisation
This is an ongoing trend that's been around for some time but is set to pick up pace as the domestic firms continue to glean know-how and tricks from international firms and then spit out the same deals faster and cheaper.
One example of this that we've seen so far is the securitisation market in Japan, where some of the international firms that saw complex financings as their exclusive turf have been surprised to find out how well the bigger local firms can compete on domestic deals.
Expect the same in China, where a nascent domestic securitisation market is being cornered by firms like King & Wood and ZhongLun Law Firm. King & Wood's client, the China Construction Bank, did get advice from Freshfields early on in the structuring process, but according to K&W it's running the deal now.

4. Beating a retreat
This year we saw the spectacular explosion of Coudert Brothers - once the international law firm par excellence and now a footnote in law firm history. Asia has witnessed many a strategic retreat from its shores and ALB bets that this isn't over yet.
At DLA Piper, Asia managing partner Nick Seddon says: "I think there's likely to be further consolidation across the region. It wouldn't surprise me to see a few withdrawals from certain cities by the Magic Circle firms." (Of course, as he says this Seddon knows that his firm has had the most spectacular growth of all in Asia in the past 12 months with new Tokyo and Beijing offices along with a new complement of lawyers in Singapore courtesy of Coudert Brothers.)
The days of setting up offices in every jurisdiction are over and international firms are happy with the hub operations of mainly Hong Kong and Singapore. However, ALB expects more tidying up of their Asian operations (Clifford Chance in Bangkok for example?) along with a few of the smaller US and United Kingdom firms quietly retrenching.

5. Increasing intra-Asian firm relationships
With the internationals preferring to operate hub operations from Hong Kong and Singapore, the way is becoming clear for domestic firms to begin developing intra-Asian networks. And the rationale has become clearer as well because since 1997-98 intra-Asian trade has grown from 38% to represent around 47% of world trade.
There's also less tension between domestic Asian firms because there's less shared territory in which one can step on a partners' toes. Take for example the tri-partite relationship between Eversheds, KhattarWong and Shahrizat Rashid & Lee. While Eversheds and KhattarWong have come to blows on the China strategy, that hasn't affected the Singapore firm's relationship with its Malaysian peer.
And as we noted earlier, while several jurisdictions just don't offer the margins required by international firms, domestic Asian firms can have a lower cost base and a different approach. We are only just seeing the beginning of moves like that of Johnson Stokes & Master opening in Phuket, while Malaysian heavyweight Zaid Ibrahim & Co exemplifies this trend. Not only does it have an office in Jakarta in association with Indonesian firm Roosdiono & Partners, but next year it is opening up in Bangkok - a jurisdiction that several global players have vacated because it doesn't have a big enough profit margin.

6. More US firms will set up in China
While it may feel as though there are already loads of US firms in China, get set for more to arrive in 2006. There are currently 39 US firms in China and only eight United Kingdom firms. But while the UK might be lagging, in reality the UK market lacks the depth to expect another rush to China. And in any case, most of the second-tier UK firms are too busy carving up Europe to look at China.
The US, on the other hand, has the deepest market in the world with 40,000 lawyers at the top 100 firms. So while they may have been slow off the global expansionist block compared to UK firms, there's more of them to come. Reed Smith, for example, has already indicated that it's looking into opening in China

7. Japanese firms grow and hire westerners
This year for the first time, Japan's leading firms will be able to tap into the new graduates from 66 law schools under revised conditions designed to boost law firm numbers. It has long been a cry from the big four that the only thing holding them back was lack of talent. The consequences of this change? Well, according to Ben Karp, legal recruiter at Ingenium Group, there are serious implications that run from the devaluation of bengoshi status. "Stellar associates at the larger firms are calculating the risk of leaving for foreign firms - often voicing a concern that they have the most to lose," says Karp.
The exponential growth that is expected in the market means that the local scene will start to resemble other jurisdictions, Karp continues. "Smaller firms will still promote themselves as specialty boutiques while larger ones will continue to offer themselves as a one-stop-shop," he explains. "The mid-sized firms will continue to struggle for identity and market share and suffer from the attrition of associate bengoshi for larger firms or to establish their own independent practice."
The other thing to watch for is local firms following Atsumi & Partners' lead in hiring the first ever non-Japanese partner, Bonnie Dixon, previously from a US firm.

8. Korean firms benefit from high levels of activity
Firms active in Korea have to be some of the happiest in Asia. Since the credit card crunch of 2004 it has been steadily on the rise with domestic companies throwing out deals left, right and centre.
Jong Han Kim, head of Paul, Hastings, Janofsky & Walker LLP's Korea practice, puts it like this: "Domestic private equity funds are coming into their own and we'll see them make bids on the privatisation of large state-owned institutions. Domestic funds like Vogo will be actively competing with international funds."
Kim also predicts an overseas listing trend with more companies floating on the NASDAQ and other markets. We already saw that this year with the US$361m listing of the Korean shipping company, STX Pan Ocean, on the Singapore Stock Exchange.
And given the easiness of fund raising in Singapore, its geographical access, the presence of a globalised securities market as well as listing requirements that are easier than those found on the Korea Stock Exchange, the SGX may well see a number of similar deals in 2006 - with a considerable number of Korean companies reportedly showing an interest in following the lead taken by STX Pan Ocean.

9. Indian firms go national
Indian firms have been operating under the strict rules and regulations of the local bar council which limits partnerships to under 20 participants. However, the most sophisticated firms are chomping at the bit to form national partnerships as the increasing amount of FDI doesn't target just one city. And besides, the international investors that are landing in India don't understand why they have to deal with different law firms in each city.
To a certain extent, national partnerships are underway with a few larger firms like Fox Mandal having an office in all the major centres - although the different offices don't share profits and are not strictly speaking in the same partnership.
The challenge is to provide a seamless service when partners don't share profits. Clients want the same notepaper, the same billing and the same quality all across the globe, never mind just in one jurisdiction.

10. Growth of in-house teams
As corporations find themselves coming under increasing regulatory scrutiny and shareholder scrutiny vis-à-vis costs, in-house teams are set to increase. The position of in-house counsel has become more institutionalised and commands more respect. And that growth is supplied by law firms who are losing their associates to the lure of more regular hours and occupying a business role in a big organisation
Firms can only be nonchalant about the loss of their young lawyers. The crunch in profits and increasing leverage ratios make it harder to appoint partners. Better to provide a good training ground and keep good relationships with the alumni.