Morgan Stanley to capture Asian wealth from Singapore hub

Singapore

MORGAN Stanley will grow its wealth management business in the region at a quicker clip than before, with plans to set up a China desk in Singapore to cater to private wealth flowing through the next economic powerhouse, said Ronald Ong, Morgan Stanley's chairman and chief executive for South-east Asia.

This balance between investment banking and wealth management reflects the shift that has already emerged at the global level for the US bank, and comes as Morgan Stanley is eager to tap Singapore's status as a private wealth management hub that is already drawing clients from traditional European wealth centres of Switzerland, and London, Mr Ong told the Business Times.

"If you were to give me a blank sheet of paper, and say if you have to start a new business today, what would it be? It would be wealth management, both private and institutional. That's the growth that has a very steep trajectory."

The bank does not break down its revenue contributions from institutional securities and wealth management in this region, but it will move to align itself more closely with global figures.

Before the crisis, investment banking at the global level made up about 80 per cent of the business. Today, that has shrunk to about half, with wealth management contributing to the rest of the pie. This shift, said Mr Ong, was a conscious decision to take volatility out of the institutional securities business.

Morgan Stanley's wealth management in the West is also boosted by a retail network that is not present in Asia.

The US bank announced last month that it would offer savings accounts and certificates of deposits to its clients from next year - products less synonymous with such Wall Street behemoths before the crisis.

Outside of the US, the wealth management business in the Asia-Pacific is embedded in the bank's institutional securities group, a concerted decision to manage Asian high net-worth clients whose wealth are rarely divorced from its business fortunes, said Mr Ong. The Singapore office, which was set up 25 years ago, serves as the Asean hub for the bank.

Mr Ong also pointed to the emerging middle-class in Asean. Indonesia's income distribution, formerly V-shaped, now sees a strong middle-income population that is driving consumer demand.

"The growing middle income, I believe, will now lead the charge to develop what I would call Indonesia's next growth, which is a very strong domestic mutual fund business," said Mr Ong. A large amount of money out of Thailand has also been invested in foreign markets.

A US$50 billion ceiling for such financial portfolio investments - set some five years ago - is not far from being reached, with rich Thai clients making savvy bonds purchases, noted Mr Ong.

They would buy dollar-denominated Korean bonds, and swop back into Thai baht for a bigger yield pick-up.

And while equity markets have been quiet, Asian corporates are still expected to demand investment banking services over the long term. This comes especially as corporates here expand beyond their borders.

With Japanese banks diversifying their portfolios in this region beyond supporting Japanese corporates alone, Morgan Stanley can also count on its strategic alliance with Mitsubishi UFJ Financial Group, which owns about 20 per cent of the US lender.

This came into play a few years ago with well-known client Neptune Orient Lines, when Morgan Stanley and Bank of Tokyo-Mitsubishi UFJ went in to both structure a S$1.4 billion rights issue and refinance a substantial term loan for the shipping line.

"We're going to see a continuance of the investment banking business. The growth of the business is in accordance with economic growth, but more importantly, with the fact that there is growing sophistication on the part of clients, to do more cross-border transactions and cross-border financing," said Mr Ong.

"We're starting to see the number of players shrinking. That's not necessarily a bad thing, because over-competition leads to problems on the business front, meaning that because of competition, they cut corners, and that leads to issues in the industry."