Asia-Pacific Structured Equity House: Morgan Stanley
Reliable delivery After several slow years for equity-linked issuance from Asia-Pacific, the asset class exploded into life. Morgan Stanley was well positioned to take centre stage in the biggest and most significant deals, making it IFR's Asia-Pacific Structured Equity House of the Year.
Equity-linked issuance in Asia-Pacific had been sluggish in recent years, as low interest rates meant companies could raise cheap debt without diluting shareholders, but higher offshore rates encouraged issuers to explore convertible bonds. That resulted in some huge deals in 2024, and Morgan Stanley was at the centre of the most significant transactions, helping corporates raise funds at attractive levels while giving investors downside protection and exposure to potential upside in share prices.
International equity-linked issuance from Asia-Pacific reached US$35.7bn, according to LSEG data, with Morgan Stanley topping the table with credit of US$5.8bn.
It was the top-ranked foreign bank in the Japanese CB market, earning US$1.5bn of league table credit for deals like a ¥200bn (US$1.4bn at the time) offering for homebuilder Daiwa House Industry and a ¥50bn trade for private railway operator Nagoya Railroad.
Much of the issuance in the region came from Chinese companies looking for cheap funding as interest rates remained relatively high, and preferring to sell shares at a premium given the depressed trading levels. Structured equity transactions also met the needs of investors who wanted to dip back into Chinese stocks at the prevailing lower valuations but were looking for some principal protection.
Morgan Stanley was at the forefront with a dominant position across large transactions and key markets, leading four of the five largest transactions in the year.
The US bank led jumbo transactions including the US$5bn convertible bond of Chinese e-commerce giant Alibaba Group Holding and the US$3.5bn CB of Ping An Insurance (Group) Company of China.
“Equity-linked was a huge active market for us and we dominated compared with our competitors. We did all the big trades in China and were also on Australia’s largest CB in three years,” said Cathy Zhang, head of Asia-Pacific equity capital markets at Morgan Stanley.
The Alibaba and Ping An trades were particular highlights. The former was Asia-Pacific’s largest international CB while the latter was the world’s largest CB from the insurance sector and the largest Reg S-only CB globally.
The Alibaba CB in May drew global investors’ attention back to Chinese technology companies, showing that a well-structured deal could overcome investors’ reservations about regulatory and geopolitical risks.
The deal was structured to complement Alibaba’s share repurchase programme aimed at bolstering its flagging stock price. The CB came with a concurrent share buyback that allowed Alibaba to repurchase around US$1.2bn of shares from CB buyers who hedged through delta transactions.
The US$3.5bn Ping An CB marked the first offshore CB offering by a Chinese insurer. Morgan Stanley played a key role in navigating the complex regulatory landscape and structuring the unprecedented jumbo offering.
Zijin Mining’s US$2.5bn CB and concurrent placement once again showcased Morgan Stanley’s ability to seize market windows. The deal, which came around three weeks after the Alibaba transaction, harnessed the upbeat sentiment surrounding CBs and took advantage of surging gold prices driven by growing tensions in the Middle East.
Notably, the Zijin CB saw significant interest from global long-only funds.
A €1.5bn CB of Anta Sports Products demonstrated joint bookrunner Morgan Stanley’s ability to tailor trades for clients. The proceeds were used to fund the repurchase of a euro CB and share repurchases, providing additional funding to Anta at a lower cost to refinance debt and optimise its debt maturity profile.
Morgan Stanley also worked on landmark transaction beyond China. The US bank’s ability to earn the trust of issuers was obvious from its numerous repeat mandates. An upsized US$925m CB for Australia-listed cloud accounting software company Xero was its third after the bank helped raise US$300m from a debut CB in 2018 and a US$700m CB in 2020. The new issue was accompanied by a tender offer for Xero’s outstanding CB to maximise price tension.
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