In a year that required the ability to pivot to different geographies and industries as several funding avenues slammed shut, Morgan Stanley demonstrated the breadth and depth of its capabilities, making it IFR Asia’s Bank of the Year.
Morgan Stanley had to be quick to adapt in 2021, as some hot markets turned cold overnight and vice versa. That required the ability to see upcoming opportunities across the region and to reallocate resources to them as investor sentiment, or regulators’ attitudes, changed.
In the past, other banks used to claim Morgan Stanley was overly reliant on China and the technology sector.
While the bank capitalised on its strengths in those areas during a booming first half, it needed to draw on capabilities in other areas as China’s tech companies found themselves largely cut off from capital markets during a regulatory crackdown and the country’s bond market faced strains.
“We are much better balanced geographically than before,” said Dieter Turowski, chairman of investment banking for Asia Pacific at Morgan Stanley. “We can be quite agile depending on where the opportunities are, and we have a lot of swing resources and people we can pivot.”
Morgan Stanley’s on-the-ground coverage – for instance in China, where it raised its joint venture stake to 90% last year – meant that even though travelling was impractical the bank was able to shift focus to different countries as opportunities emerged.
“The way business is conducted now is fundamentally different from before, and having a strong team on the ground is very important,” said Julien Begasse de Dhaem, head of global capital markets for Asia Pacific.
As some of its rivals lost senior bankers during the year, Morgan Stanley managed to strengthen its team in places like Australia, as it rang up US$29.1bn of equity volume for Asia ex-Japan and US$14.2bn for G3 bonds.
Morgan Stanley was on the crest of a wave in June, leading US IPOs for Kanzhun, Full Truck Alliance and Didi Global, the latter marking the largest Chinese ADR listing. Two days after Didi began trading, Chinese authorities announced that the ride-hailing app provider was in breach of soon-to-be-introduced rules banning companies with sensitive data from listing overseas – though there was no suggestion that the bookrunners of the US$4.4bn IPO were at fault.
China’s clampdown on the technology and private education sectors subsequently made it impossible to contemplate foreign listings, while US authorities also discussed rule changes that could shut Chinese companies out of stock markets there.
As the lucrative pipeline of China-to-US listings closed, successful banks needed to be able to switch quickly to opportunities in other markets and to keep their clients connected to funding routes.
Morgan Stanley had already helped US-listed Chinese companies diversify their market access. It led Bilibili’s US$3bn Hong Kong IPO in March, the first “homecoming” listing that was not grandfathered under the special administrative region’s rules, as well as another Hong Kong float in June for US-listed HutchMed (China), which became the first Chinese healthcare company to complete a triple primary listing.
Later in the year Hong Kong’s listing pipeline slowed too, but Morgan Stanley had already delivered Asia’s biggest IPO of the year, acting as left lead for online short video company Kuaishou Technology’s HK$47.8bn (US$6.2bn) deal in January.
Morgan Stanley brought the year’s largest IPOs in India, Thailand and Indonesia, too.
In fact, it was joint global coordinator on India’s four biggest IPOs of 2021. The Rs93.75bn (US$1.3bn) IPO of food delivery app Zomato was the first deal to prove that India could be a suitable listing destination for tech unicorns. Huge oversubscription and strong secondary performance opened the floodgates for big listings from Nykaa and PB Fintech.
Indian payment services provider Paytm then pushed the limits with its record Rs183bn IPO, as Morgan Stanley helped bring in foreign anchor investors that were keen on the company’s long-term story.
In Thailand, the bank brought consumer finance company Ngern Tid Lor to market with a Bt38bn (US$1.2bn) IPO, and helped Indonesian telecom tower operator Dayamitra Telekomunikasi’s Rp18.3trn (US$1.3bn) float.
As a lead manager on Australian online property exchange Pexa Group’s A$1.17bn (US$905m) IPO, it had to conduct an unusual 24-hour bookbuild to beat the terms of a rival trade bid. Bringing the company a better offer resulted in Australia’s largest tech IPO.
Appetite for risk
Even in volatile conditions, the blocks business remained active. Morgan Stanley led the market in overnight trades in 2021, racking up around US$14bn of league table credit for a market share of 22.9%, according to Refinitiv data.
Deals like Prosus’s HK$114bn sell-down in Tencent Holdings and a A$414m block in Australian gas company Santos by a unit of China’s ENN Energy demonstrated the bank’s cross-border capabilities, while it won four sole mandates for follow-ons in WuXi Biologics totalling US$5.8bn.
That risk appetite was evident too in a surging M&A business, which saw revenue increase 50% from an already strong 2020, and fed into capital markets transactions.
“We have taken more risk this year, but the amount of risk management has meaningfully increased,” said Begasse de Dhaem.
Morgan Stanley was at the forefront of leveraged buyout transactions and tailor-made financings in the region.
It was a mandated lead arranger and bookrunner on the US$1.1bn term loan helping Blackstone take technology company Mphasis private, in India’s largest LBO to date.
In November, it was lead left bookrunner on education technology firm Byju’s US$1.2bn borrowing, the largest unrated Term loan B globally. The deal, which came not long after the company broke even, was more than doubled from an initial size of US$500m and marked the biggest covenant-lite TLB from India.
The bank also stepped in when China’s AirPower Technologies, formerly known as Yingde Gases Group, raised a US$1.8bn term and bridge loan to repay bonds and loans in preparation for a potential IPO.
Morgan Stanley saw activity pick up strongly in Australia, where its highlights included a A$2.15bn multi-tranche loan for the acquisition of telecommunications company Vocus Group by Macquarie and Aware.
“Levfin is really coming into its own in the region, especially in Australia. We have dominated LBOs and innovated from a product perspective,” said Turowski.
Asia’s bond market followed a similar pattern to ECM. A burst of 144A offerings in the first quarter played to Morgan Stanley’s strengths, with standout deals including Alibaba Group Holding’s US$5bn multi-tranche deal, which included its first 20-year note and sustainability tranche.
Bond issuance became more difficult around the end of March, as troubles at China Huarong Asset Management caused Chinese spreads to widen, before a crumbling high-yield market collapsed in September.
Against this backdrop, standout deals included the US$4.15bn multi-tranche trade for Tencent, which printed its largest and tightest 40-year tranche, South Korean search engine Naver’s offshore debut, and immaculate sovereign deals for the Philippines and Mongolia. Morgan Stanley won mandates for repeat clients AIA and Temasek Holdings, and was the arranger of choice for most of Australia’s Big Four banks.
The bank has tended to be selective in the high-yield market, with limited exposure to Chinese real estate.
Morgan Stanley’s lead left role on the US$400m high-yield deal for Indonesian oil and gas company Medco Energi Internasional in November showed its thoughtful approach.
Reopening the non-China high-yield market after a lull of almost two months, Medco adjusted its deal downwards from a planned US$500m to bring down investors’ yield demands and ensure decent secondary trading. In contrast, three other Asian high-yield deals announced around the same time were scrapped.
In equity-linked, Morgan Stanley worked on electric vehicle producer Nio’s US$1.5bn dual-tranche convertible bond, a rare euro currency CB for Singapore Exchange, and helped Cathay Pacific bring an upsized HK$6.74bn offering, despite the airline’s struggles. The bank also arranged Vingroup’s US$500m exchangeable bond into shares of VinHomes, Vietnam’s largest and tightest equity-linked offering.
Morgan Stanley ensured Asian companies were not left out of the SPAC boom. It was a financial adviser for ReNew Power’s US$855m PIPE, as it completed the first de-SPAC for a renewable independent power producer, and ride-hailing app Grab Holdings’ US$40bn de-SPAC, the largest SPAC merger ever, following a US$4bn PIPE offering.
It arranged around US$5bn in collar financings for Asian clients looking for certainty in choppy equity markets.
“Execution is complicated, so the client needs to feel they can trust you,” said Begasse de Dhaem.
Strong outcomes in a tumultuous year showed that clients around the region were right to put their trust in Morgan Stanley.
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