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Regional chief says bank will continue to expand its Singapore and Asia business.
Conrad Tan in Singapore
Morgan Stanley will continue to expand its operations in Singapore and the rest of Asia despite recent changes affecting its American parent company, its Southeast Asian head said this week.
Ronald Ong, chief executive for Southeast Asia, said the investment bank's main business lines in Asia were still doing well.
Mergers and acquisitions business across the region had hit "a record level" this year, he said. And as for investment banking business in Singapore: "This year is probably going to end up one of our best."
This trend is likely to continue over the next year or so. "The M&A business has actually increased quite substantially. I see M&A driving investment banking business for at least the next six to 12 months."
But the capital markets business - helping companies raise funds from investors through share or debt issues - has slowed since the middle of the year. "We're seeing some transactions done, but only for high-quality issuers."
Despite the sharp withdrawal of funding from credit markets worldwide, finance has not dried up completely, he said. "For the right deal and right client, it continues to be available."
The fact that Neptune Orient Lines was able to obtain finance for its recent US$5-billion bid for the German carrier Hapag-Lloyd shows there are still investors willing to back deals, he said.
Last week, Japan's Mitsubishi UFJ Financial Group (MUFG), one of the world's biggest banks with $1.1 trillion of deposits, bought a 21% stake in Morgan Stanley for US$9 billion.The capital injection came days after US regulators gave Morgan Stanley approval to convert itself into a bank holding company, which effectively turned the stand-alone investment bank into a commercial bank, subject to stricter federal regulation.
The changes "will not affect our operations", said Mr Ong. "In fact, it's positive for our clients and our service and business."
Morgan Stanley recognises the continued importance of Asia to its business, he said. Asia now contributes about a sixth of the bank's global revenue and "we see that increasing".
Morgan Stanley now has 27 investment bankers in Singapore including two senior members recently seconded from the US. It is also adding staff in Indonesia, where it recently received a licence for securities underwriting.
Other divisions, including fixed-income, equities, commodities and asset management, were also doing well, Mr Ong said.
Tan Su Shan, who joined Morgan Stanley in May as managing director of its private wealth management business in Southeast Asia, said the bank had added new private clients. "For September alone, year on year, we saw double-digit growth in our business."
With MUFG as a major shareholder, Morgan Stanley - which has been exploring options for expanding private banking in Asia - could form a "strategic alliance" with the Japanese bank, though no such decision has been made yet, Ms Tan said.
"We want to build a full private bank. The MUFG deal does give us a third option of a strategic alliance, which we are still exploring. The first two options are to build our own, or to buy."
Meanwhile, Bloomberg reported Morgan Stanley as saying that it sees big rate cuts in China as a way to increase spending as a key to helping GDP growth. China will cut interest rates as many as five times by the end of 2009 and will step up spending to limit the effect of the "global financial tsunami" on the nation's economic growth, it said.
The central bank will cut borrowing costs by 27 basis points each time, reducing the one-year lending rate to as low as 5.85% next year from 7.20% now, said Qing Wang, a Hong Kong-based economist. Government spending may add as much as three percentage points to economic growth, he said.
Global growth is slowing after the collapse and bailout of banks in the United States and Europe propelled the cost of borrowing in money markets to the highest ever.
Slowing economic growth in Europe and the US, which account for 40% of China's exports, will translate into lacklustre exports, falling corporate profit and easing inflation, Mr Wang said.
"A substantial improvement in the inflation outlook should help ease the lingering concerns about the inflationary consequences of an expansionary macroeconomic policy," he said. "We expect a decisive policy shift towards boosting growth in the coming weeks and months."
Mr Wang cut his forecast for inflation next year to 2.5% from 4%. He lowered his estimate for economic growth in China next year to 8.2% from 9% and lowered his forecast for this year to 9.8% from 10%.
More spending and tax cuts would contribute between one and three percentage points to growth, Mr Wang said.
China can "afford to run multi-year fiscal deficits without running into debt sustainability problems" because it has public debt of only 30% of gross domestic product, Mr Wang said.
The main risk to his forecast was a "meltdown" in the property sector across the country, he said. The consequences would be so serious that even pro-growth policies wouldn't prevent the economy growing less than 7%, he said.
The People's Bank of China last month cut the one-year lending rate to 7.20% from 7.47%, the first reduction in six years.
Published in Business Times (Singapore) on Oct 8
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