Just about every investment bank with pretensions to be an investment bank (except, of course, Bear Stearns) is expanding in Asia. Is this wise?

Not necessarily. Capital markets fees in Asia are already falling – figures from Thomson Financial, reported by Reuters last week, showed fees from equity and debt issuance in Asia ex-Japan are down 16% and 52% respectively on the first quarter of 2007.

Fees from M&A advisory work are still rising in Asia, however – thanks to China (where M&A deals rose by a third) and – more specifically – to Aluminum Corp’s massive US$14.32bn acquisition, with Alcoa, of a 12% stake in Rio Tinto.

Mark Renton, head of Citigroup’s Asia Pac investment banking arm, has declared himself “cautiously optimistic” about Asia’s future.

But is cautious optimism enough when everyone’s looking to Asia for salvation? Morgan Stanley says it intends to “throw more resources” into Asia; JPMorgan’s hiring 1,700 people; BarCap’s adding 1,500. Even UBS, which already has a big presence in the region, hasn’t ruled out further expansion.

It may all end horribly. If capital markets activity remains in the doldrums Asia’s companies won’t have the cash to engage in M&A activity. And then what will all those thousands of extra bankers do?