Q: How has the current climate (U-shape recovery etc.) changed your strategy, if at all?
MF: Our Asia Pacific footprint is critical to the firm's overall business strategy. We are not immune from the global downturn in markets and therefore we are also focused on managing costs and further upgrading the quality of our people. That said, Asia has grown less rapidly than the rest of the world, and Morgan Stanley's strategy here has been measured - organic growth that moderates the cycles. Slower years are a great opportunity for us to differentiate ourselves with clients. Our healthy pipeline, particularly in equity and M&A, is evidence of that and part of this year's strategy is to grow our market share. In this sense, our Asia Pacific strategy has not changed at all.
Q: Which countries does Morgan Stanley view as core to its Asian investment banking franchise?
MF: Our core markets are China, Hong Kong, Taiwan, Singapore, Korea and Australia, but we have done important transactions in every other market in the region. We believe that it is prioritization, in terms of markets, sectors and products, that has been the key to our success. Our strategy is to build a global investment-banking platform in Asia that provides clients in each key market those products and services they need to achieve their strategic and financial aspirations.
Q: Last year, Morgan Stanley had a dominant position in the lucrative China business. Is that a trend that is set to continue? Will the China business continue to be so lucrative?
MF: Our strategy has always been one of long-term commitment to China throughout the market cycles and an alignment of our businesses and resources globally around Chinas needs. We are unwavering in this commitment. In our view, China has made impressive progress in terms of its economic reform, restructuring and corporatization program and we believe that it will continue apace over the next several years. At present, we are in a virtuous circle for China.
Our current pipeline in terms of financing consists of IPOs for China Telecom and China Aluminum and a debt financing for the Ministry of Finance, all three of which will be extremely important for our franchise. There are a number of other financing and M&A opportunities in China that we would also like to be part of. We fully expect that Chinas state enterprise restructuring and corporatization process will continue apace over the next several years, even if some years are slower than others. It is also likely that there will be more follow-on offerings from some of those companies that have already been taken public.
Q: Which is the greatest area of potential growth? Is it M&A?
MF: As we have said before, M&A is an area of huge potential growth. Asia Pacific still represents the last great restructuring story on the planet. That said, equity financing will continue to drive investment banking revenues over the coming years for those firms with the capability to execute large, often complex transactions in sometimes difficult markets.
There are also a number of other categories, some of which may overlap, but that we feel represent excellent opportunities for growth in our business. They would include China, as probably the most significant multi-product business opportunity; Banks and Financial Institutions; Privatizations; the Digital Economy and Digital Technology, in terms of their build out.
Most importantly, the one significant opportunity often not mentioned is clients. Firms that focus on product rather than client needs will start to lag behind. Prioritizing and developing our key client relationships is truly the area of greatest potential.
Q: What are the reasons for the reorganization of the fixed income team?
MF: When Vic Garber was promoted to CAO for the Fixed Income Division globally and relocated to New York, we took the opportunity to roll out the client centric structural changes in Asia Pacific that we were putting in place in the US. The new structure aligns products more effectively around client needs, so, for example, we have grouped credit products and interest rate products separately under Jim Sandling and Jon Kindred, who co-head the whole division in Asia. Jim Moonier, who previously headed commodities, is now responsible for all sales, regardless of product, based in Singapore. The changes also leverage our resources and expertise more effectively between Hong Kong, Singapore and Tokyo.
The reorganization on the trading side also mirrors what we had done earlier in the year with the debt origination group, which now groups both the investment grade and the high yield product under Bob Voreyer.