Best emerging markets equity house:
Morgan Stanley
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Also shortlisted: |
Key to the post-crisis rehabilitation of Morgan Stanley’s business model has been its steely focus in recent years on its competitive strengths as a client-focused capital-efficient investment bank, with a strong advisory and wealth-management business.
Its emerging markets equity business over the last year aptly demonstrates this investment-banking clout. During the awards period, Morgan Stanley’s equity franchise stands out for being particularly well-balanced across sectors and products, while it has not been dependent on large block deals for league-table credit.
Morgan Stanley pounced on market windows to underwrite transformative equity deals, entrenching its status as one of the most trusted advisers for state-owned enterprises and expansionist private players in an era of fee-compression, bookrunner inflation and Asian deal-flow dominance. In Asia, for example, Morgan Stanley’s franchise was diverse with financials, TMT and consumer, including healthcare, each representing a third of the firm’s league table credit.
Morgan Stanley’s leading role in complex transactions, providing holistic financing advice, generating repeat business, and using capital in targeted situations – such as select blocks – deserves credit. According to Dealogic, Morgan Stanley also boasted a 16.6% market share of global equity sales and trading revenues in 2014 as a whole, placing it first among nine of its peers.
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We have focused not just on generating league-table credit but on smarter revenue generation
Jerome Leleu, |
During the awards period, Morgan Stanley arranged the largest number of deals, with a 7.21% market share, representing a total deal value of $22.5 billion, followed by Goldman Sachs with a 6% market share. Its regional footprint is particularly impressive, though it lags peers in the Middle East and in central and eastern Europe. Still, the latter market had an equity year to forget, in part, thanks to the Russia-Ukraine conflict. It was lead arranger in Latin America – which also experienced a dire year for equities thanks to Brazil’s slowdown – and arranged a similar number of deals in Asia as Goldman Sachs, though the latter pipped Morgan Stanley in league-table credit by market-share in the region.
For the past two years, China has offered the largest emerging market equity offerings. The stand-out equity deal of the year remains the $25 billion New York Stock Exchange listing of Chinese e-commerce company Alibaba, the largest IPO in history, to become the second-largest listed Chinese company. Morgan Stanley, along with Credit Suisse, was a key player from the earliest stage of the intensive process, from positioning to marketing materials, roadshows and prospectus. The landmark transaction represents repeat business for the bank and a judicious use of its modest balance sheet, relative to the likes of Citi and Goldman Sachs, having arranged credit facilities for the technology group since 2012. It was also the lead left bookrunner for Alibaba’s $8 billion inaugural bond in December last year.
In addition, Morgan Stanley acted as sole bookrunner for Ping An Insurance Group with a $4.8 billion follow-on, the largest sole-book equity offering ever in Asia Pacific ex-Japan, and the largest of its kind in the region over the last decade. Notably, the Chinese group initially worked with arch-rival bookrunners Credit Suisse and Goldman Sachs, but Morgan Stanley subsequently won the mandate by demonstrating its ability to attain commitments for the H-share private placement, which was conducted over a weekend – no mean feat given the regulatory challenges and niche investor base for an esoteric illiquid deal.
Trust
In addition, Morgan Stanley arranged the largest-ever non-FIG Chinese private company overseas listing in July last year as the lead left bookrunner on meat-processing company WH Smithfield’s $2.4 billion follow-on. Further underscoring trust invested in the bank by strategic emerging-market clients, WH Smithfield initially attempted to list in April with a 29-strong syndicate but three months later opted for a two-bookrunner deal with the US bank leading the transaction.
In the Middle East, Morgan Stanley was joint bookrunner for the $1.6 billion IPO for Emaar Malls, with a 30 times oversubscribed order book, the largest IPO in the UAE since 2007, the largest real estate IPO in EMEA since 2009, and the first rule 144a/RegS global IPO on Dubai Financial Market to include an international bookbuild.
Underlining the vigour of Morgan Stanley’s real-estate franchise, the firm acted as an underwriter on Mexico’s first mortgage real estate investment trust Fideicomiso Hipotecario, which raised Ps8.6 billion ($549 million) in November, the country’s largest debut IPO of the year at the time.
Jerome Leleu, Morgan Stanley’s co-head of equity capital markets for Asia Pacific in Hong Kong, explains the equity shop’s successes over the last year: “If you look at the fee dynamic in Asia in recent years, it is converging with Europe. As a result, we have focused not just on generating league-table credit but on smarter revenue generation. We are pleased with our diverse split of deals, including higher-margin IPOs and private placements. We are selective when we deploy our balance sheet.”
