Morgan Stanley Named Best Investment Bank in China
Finance Asia, a regional capital markets magazine, recently named Morgan Stanley "Best Foreign Investment Bank" and the Firm's joint venture China International Capital Corporation as "Best Domestic Investment Bank" in China.
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On the back of the Firm's recent success with the China Unicom IPO, and a very positive vindication of Firmwide efforts for leadership in the China market, regional capital markets magazine Finance Asia recently named Morgan Stanley 'Best Foreign Investment Bank' and the Firm's joint venture China International Capital Corporation as 'Best Domestic Investment Bank' in China.
Best Foreign Investment Bank: Morgan Stanley
Morgan Stanley has had an outstanding 12 months in China. Three of the highest quality IPOs out of China were handled by the bank: China Unicom's $5BN IPO, the $407MM block trade in China Telecom, the popular Internet portals Sina.com and AsiaInfo. According to Bloomberg equities league table, Morgan Stanley cruises into the number-one spot for China, with $2.5BN worth of deals and an 18% market share.
The China Unicom deal saw $15BN of institutional demand and was four times oversubscribed. Shares were priced at 19.8% premium to the midpoint of the initial price range and near the top of the revised price range of HK$13.8 to HK$16.
With AsiaInfo's $138MM IPO, Morgan Stanley lead managed the first-ever Internet infrastructure IPO from Greater China and the first Internet infrastructure IPO completed in 2000. This deal saw the highest subscription level ever achieved for an Asian Internet IPO, with a demand of $255MM translating into an oversubscription rate of more than 50. The price at the end of the first day rocketed to over $99, almost a 315% premium to its offer price, representing the best offer-to-first-day-close performance ever for an Asian Nasdaq-listed Internet IPO.
With Sina.com's $138MM IPO, Morgan Stanley succeeded in pricing the deal near the high end of the filing range, and the price closed up 22% on its first day of trading. There is little doubt that the skilful handling of these deals contributed to the boost of investor confidence in China's markets. There is also no doubt that Morgan Stanley's franchise has been expanded by its association with China International Capital Corporation (CICC), providing it with insights into a range of sectors and personalities within China. It is no coincidence that from July last year to June this year, CICC and Morgan Stanley have dominated the China issuance market. CICC comes in fourth position overall, with an 11% market share, worth $11.5BN dollars.
In particular, the China Unicom IPO, the largest in Chinese history, demonstrated the value of Morgan Stanley's global distribution network, its knowledge of the investor base and the research franchise. Morgan Stanley also scored strongly in the bond sector, with deals mandated by the Ministry of Finance and the State Development Bank. Over the last 12 months it has had a market share of 27%. Landmark deals were the structuring and execution of $403MM unit bond for APP China. The transaction met strong investor demand with 50% oversubscription and was placed with 100 investors globally. The high-quality placement ensured strong aftermarket performance.
Best Domestic Investment Bank: CICC
It is perhaps not surprising that the China International Capital Corporation (CICC) should win the award for best domestic investment bank. A fusion of Chinese local experience and Western expertise provided by Morgan Stanley's 34.3% stake, CICC has been very active in the local market since its formation in October 1994. The fifth anniversary of the company's existence marks the fulfillment of its founding objective: to serve as the leading investment bank driving the reform of China's state owned enterprises.
The first step on this journey was the $4.2BN China Telecom IPO in October 1997, in which it acted as global coordinator, joint bookrunner and joint lead underwriter. China Telecom's primary markets success was followed by an equally successful secondary offering in November 1999, which totaled $2BN. Again CICC acted as joint lead underwriter and joint bookrunner of the public offering. Last, but not least, CICC acted as financial adviser to China Telecom's $6.4BN acquisition of mobile telephone assets in three additional provinces.
The new year began with the successful completion of the highly important Petrochina IPO that raised $3.89BN in market conditions rather unfavorable to old economy shares. Petrochina's IPO marked the completion of the restructuring of China's entire oil and gas industry aimed at positioning the company as a competitive player in the domestic and international energy markets. In this transaction CICC again acted as joint global coordinator, joint bookrunner and joint lead manager. At the same time, CICC, as joint lead manager, successfully brought one of China's leading Internet companies, Sina.com, to Nasdaq, raising $68MM in its extremely well received IPO.
Shortly after the completion of Petrochina and Sina.com in April, CICC acted as joint global coordinator, joint bookrunner and joint lead manager for China Unicom, the country's second major player in the telecommunications industry. Unicom's IPO came to market in June, raising $4.9BN [prior to the greenshoe]. Unicom was warmly received by investors, allowing it to raise its price range and complete the offering at HK$15.58 per share, near the adjusted high end of the range.
CICC has a number of major offerings pending, including the IPOs of Sinopec, the nation's second major energy company, and BaoSteel, China's largest steel maker. These and other transactions now in the formative stage should continue to establish CICC as the major underwriter of China and China-related equity offerings in the international markets.
Domestically, CICC led a number of important A-share offerings including the Rmb874MM IPO of the China World Trade Centre and the secondary offering of Rmb1.24BN for Konka Group. These two transactions were significant in that they marked the first time Chinese A-share offerings had been priced using international methodologies rather than traditional administrative guidelines.
In particular, the Konka offering was significant since it marked the first time a Chinese A-share offering made use of the book-building process and a roadshow for China's nascent institutional investors. This was entirely unbroken ground as CICC adopted international practices to the Chinese market by first building an institutional book, establishing a price range via an institutional roadshow and, in the final stage, offering shares to retail investors based on this price range, allowing them to bid within a range rather than for a fixed price for the first time. The resulting order book enabled the transaction to be priced at a tight 5% discount to the secondary market trading price, as opposed to the typical 30% to 40% discount based on the traditional administratively set fixed price offering.
During the course of the year CICC acted as lead manager in the placement of shares for four companies totaling Rmb2.6BN making it one of the top A-share underwriters in the domestic market. Looking forward, CICC will continue to evolve as an important participant in China's domestic capital markets.
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