Morgan Stanley picked its battles in an extremely competitive market and was consistently first to take advantage of short windows in a volatile year, especially for Chinese equity offerings.
The US bank handled key deals either side of the A-share market collapse in the summer and focused its energy on situations where it could play a leading role in execution.
It dodged most of the bunfights among 20-strong IPO syndicates and instead chalked up jumbo – and lucrative – deals as sole arranger or one of only two or three sponsors.
“In a year of two halves marked by consistent volatility, we are proud of our execution success, which was based on our accurate market judgements,” said Jerome Leleu, co-head of Asia-Pacific ECM with Mille Cheng.
“This included reopening the Hong Kong IPO market in September’s challenging backdrop. Being nimble allowed us to deliver an outstanding year in ever-changing conditions,” he said.
The first eight months of the review period, from November to June, was a golden period. The soaring A-share markets boosted investment sentiment, setting the stage for many giant equity offerings from China, which was again the busiest market in Asia.
During those eight months, Morgan Stanley led most of the jumbo Chinese IPOs, including the HK$31bn (US$4bn) float of Dalian Wanda Commercial Properties, the HK$25bn offering of CGN Power, the HK$38.7bn IPO of Huatai Securities and the HK$32bn float of GF Securities.
Sentiment in China’s stock market reversed in mid-June. By mid-July, the Shanghai stock market had already fallen more than 30% from the seven-year high in June.
Despite this challenging backdrop, Morgan Stanley, as one of the sponsors, successfully completed the HK$11.28bn IPO of China Railway Signal & Communication Corp in July, thanks to the support of cornerstone investors that took up almost 70% of the deal.
In September, the bank broke a two-month lull in Hong Kong IPOs with the HK$2.2bn listing of IMAX China and HK$1.9bn float of lingerie manufacturer Regina Miracle.
Both were the subject of extensive pre-marketing, and reasonable valuations at launch helped build momentum, with both then priced at a premium to their closest peers.
The HK$8.87bn listing of Dali Foods Group was the first sizeable Hong Kong IPO to be done without a disproportionately big cornerstone tranche after the equity rout in China. Instead of hiring an army of bankers, Dali picked only Morgan Stanley and Bank of America Merrill Lynch to run the transaction.
On another occasion Morgan Stanley snatched a HK$36.83bn private H-share placement for Ping An Insurance from two of its biggest rivals. The win hinged on Morgan Stanley bringing in Alibaba chairman Jack Ma and Tencent chairman Pony Ma among the 10 investors.
The Alibaba relationship also won Morgan Stanley a HK$12bn private placement of Alibaba Pictures Group, the film and entertainment unit of the Chinese ecommerce giant, in June, though the deal did come with a hefty 20% discount.
The bank’s geographic spread was impressive and involved the prized mandate of the year – Japan Post, where it was a joint global coordinator. The three-leg mammoth ¥1.4trn (US$11.8bn) IPO of Japan Post Group was the largest Japanese government sale since 1999 and an important success.
Morgan Stanley also caught the eye for completing two block trades in Japan, when normally sellers prefer to offload shares directly in the liquid secondary market. In May, US-based Cerberus Private Equity, with Morgan Stanley as sole bookrunner, raised ¥103bn through the sale of part of its stake in Japanese hotel and railway operator Seibu Holding in the largest overnight block in Japan in almost a decade. In October the seller was back, again with Morgan Stanley.
The US bank racked up a series of notable deals across the region with the Rs30bn (US$462m) Interglobe Aviation float, the largest Indian IPO of the year, and IndusInd, at Rs43bn the largest qualified institutional placement for the year.
Despite the lacklustre performance of South-East Asia, Morgan Stanley featured as sole global coordinator on the Bt37bn (US$1.1bn) IPO of Thailand’s Jasmine Broadband Internet Infrastructure Fund, the largest SE Asia IPO for the year.
It also had key roles in the jumbo recapitalisations of Australian lenders NAB (US$4.3bn) and CBA (US$3.6bn).
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