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00:00Quite a buzz in Hong Kong. Buzz. Real buzz. Right? You've been here. You come here a lot.
00:05Many, many times. Does it feel different? Feels good. Okay. Feels good. What's different?
00:09Do you feel? I think people sense that some of the U.S.-China tension has normalized a bit
00:16and that the capital markets are receptive to new product. I mean, the reality is that the
00:23China progress through COVID and coming out of COVID has been spectacular across multiple
00:31industries. As you well know, you report on every day, AI, robotics, EV, biotech, and now Hong Kong
00:40being the fulcrum to raise capital. Pretty exciting when the capital actually starts coming to market.
00:46So you had sort of the green shoots of the development onshore, but now you have the
00:52global capital markets being receptive. You guys have probably the best position
00:58in terms of this resurgence in IPOs and equity capital markets raising here in the city.
01:05I had to look at the league tables. I won't disclose the actual number. Help us understand
01:10what the competitive environment is like for deals, given the resurgence that we've seen in
01:15activity here, and what's the appetite from non-Asian-based investors to participate in all
01:21the fundraising that's taking place here in Hong Kong. First of all, I love the setup to the
01:26question, so thank you so much. Yeah, I did disclose the rank, though. I really appreciate that.
01:31The team stability has been remarkable, beginning with Gokul LaRoy and then the heads of banking,
01:38George Taylor, Shane Zhang, heads of equities, Ben Walker, head of fixed income, Nala, Meda, and then
01:45number one research for a decade. Plus, you know, you've interviewed all the analysts.
01:49Having stability matters out here. It matters. And when we think about the diversification of
01:56Morgan Stanley businesses, Asia has always been a site of comparative strength, which means you
02:01need to come. You need to be here when things are good, when things are less good. But the reality is
02:06China is the second most liquid market in the world, and asset managers are going to want exposure.
02:12So when times are a little tougher, maybe they'll be underweight, and maybe it'll be beta,
02:16more passively held. But when the animal spirits are kicking in, and when there is clear advantage
02:22being struck by winning companies, they want alpha. When they want alpha, they want company-specific
02:27allocations. So that's when the new issue environment becomes so important. And we're having a great run,
02:35thanks to that leadership, bringing companies to the public sphere. And it's not just the progress in Hong
02:44Kong relative to Asia. It's that Hong Kong, as you know, is the most active IPO market in the world.
02:50Quite extraordinary. And that's going to continue. And it's across industries. So if you are an investor,
02:56and you're interested in one piece, robotics, or AI, or EV, or maybe gold, metals, you have opportunity
03:03across sectors.
03:05How do you look at it competitively now in terms of ECM business? Because it seems like the landscape
03:10has changed. I think five years ago when you asked us, could a Chinese bank be among those league
03:15tables? That probably answer was no. But now you're seeing them rack up more of these maybe smaller deals.
03:19But they are racking up in terms of volume of the number of listings that are happening.
03:24How do you view this sort of landscape now?
03:26I think that distinction is important relative to the past. You know, we had the SOE period. You go in,
03:34the global investment banks go in and try to do the privatization. Then we had the period of sort of
03:39the Alibaba, Tencent led, new wave. Then you had the competition of the local players,
03:46A-share listing. But as you well know, you now have contemporaneous AH listing.
03:50Yes.
03:50So you have to find ways to partner with the local incumbents such that the company feels
03:56comfortable that they're getting local advice, but they're also getting know-how on how to list
04:00globally. So that partnership, I think, is going to continue because the contemporaneous AH, the dual
04:07list, allows you to raise more capital across a broader investor base. So I think that norm is going
04:12to continue. I think with respect to the competitive environment, to be clear, it's as
04:19toughly fought as it ever has been. But these companies want to know what your EV and robotics
04:25expertise is within banking research around the world. What are the developments that are going to
04:30make investors go overweight a particular robotics or biotech name that comes listed here relative to
04:37a weighting they have in Europe or the US? So the global perspective for asset managers and the
04:43ability to see that through the lens of the investment bankers, effectively advising those
04:49companies is super important. The other piece is we have a very large equities business, prime brokerage
04:54and cash business. That's on the back of folks that want this exposure to the second most liquid market
05:00in the world.
05:01Are you happy with your manpower compliment? It seems like, do you have enough work? Do you have
05:06enough people? How does that dynamic work in your head in terms of where you need resources?
05:09Oh boy, you know, David, that's such a great question because I've watched you guys for many
05:14years with folks that are sort of post-cyclically jumping in, wanting to hire a lot of people and
05:18then folks that are, we tried to be pretty stable, 2,500 people in Hong Kong. That's been a stable number.
05:24Okay.
05:25Even with AI sort of invading the space and creating efficiency and effectiveness,
05:30you need folks that are facing clients or a high net worth group, as you know, led by Vincent Troy,
05:36folks that are 25, 30 year players that can access the global network, but also have folks that have
05:41domain who are spending time in Seoul, spending time in Tokyo, spending time in Mumbai and spending
05:46time in here, bringing a pan-Asia perspective. So there'll be times when right now it feels
05:51bold up in the investment banking space where we're maybe a little light, but then you lean
05:55on your global partners. What you want to avoid is a feast or famine. Again, the clients see
06:00consistently whether you have a lifer or someone that just came on 18 months ago.
06:04Yeah. Is there definitely then no job cut discussions for 2026 then now, Ted?
06:09Well, I think the reality with AI development is that you're constantly thinking about how there's
06:17greater efficiency, but then also effectiveness. So folks have to raise their game. There's an ongoing
06:25sort of competitive threat, and that competitive threat is going to come from the highly digitized
06:33machine. The robot. The robot. The robot can do stuff. But in terms of overall staffing, I feel really
06:40good about what we have in Hong Kong. Really good. Okay. You mentioned wealth. Let people hear from you.
06:45What's the wealth strategy for Morgan Stanley in Asia? Well, I think the wealth strategy is to be
06:50well-connected with our colleagues throughout Asia, but then to offer the clients sort of a global
06:56perspective. They are Asia-based, but they want to figure out how to allocate into the private
07:02assets class. They want to figure out how to have high risk adjusted returns in a sort of a weaker
07:08dollar regime. They want uncorrelated risk. So bringing the globe to our wealth management clients
07:14here I think is very important, but then also how well connected are they into the banking and
07:18research ecosystem? They're highly sophisticated. What does Morgan Stanley bring across what we like
07:23to call as David and Yvonne, you know, the integrative firm that makes the Morgan Stanley
07:28kit a little different than the guy down the street. Has it become more competitive now,
07:32you think, in the wealth business? I think one of the things we learned, excellent question Yvonne,
07:36I think one of the things we learned about the wealth management business is scale matters.
07:40You know, we were under scale for a lot of years. Now that business in the US is a $7 trillion
07:47business, but it's still only 10% of the total TAM available. I think here too, we've looked to try
07:52to be a scale player, sticking to the high net worth segment, making sure they're operating with a
07:57certain channel, but scale matters and we'll continue to build accordingly. And how does Hong Kong
08:03dovetail into your plans in terms of wealth in mainland China? Is Hong Kong still the jump off point?
08:07Yes. As far as many of the solutions are concerned? Yes. Hong Kong is existentially
08:11important. It's the port for capital flows. It always has been right through 97, right through
08:17the periods that we've had ups and downs. And then through COVID, I think Hong Kong is going to
08:22continue to be a financial center for many, many years to come. So the beachhead here, 2,500 people
08:28we have in Hong Kong, absolutely critical. So for those of us that come two, three, four times a year,
08:34it's important that clients see that we are very much committed to Hong Kong as the unique center
08:40that it is. We were just talking to David Solomon from Goldman saying he's heading to China. Do you
08:43have plans to head to the mainland, Ted? Tomorrow, I'm on a different calendar. Tomorrow,
08:48I'm heading to Tokyo, where we spend a lot of time. Japan, very important to us. China, important to
08:54India, important to. This is one of the things that's quite extraordinary. You have three very different
08:57narratives. That's even before you get outside of the big three. We know them. We could do 5,
09:0310, 15 minutes on each one. But for us, Japan is very important. We have a 25% partner in Mitsubishi
09:10UFJ. They have held us since the financial crisis. We meet twice a year. We see each other quarterly.
09:15What's going on in Japan is truly extraordinary. And Japan's connectivity to the rest of Asia is
09:21important. In what sense? What's changed for you in Japan? Apart from the interest rate that's
09:26there. Well, okay, but that's critical here because in a zero zombie type of economy, you have
09:34effectively yen and real estate and mattresses. Now, they've been able to manufacture some inflation at
09:40a time when shareholders are now actively looking for governance. That changes the game a little bit.
09:46So now you have some real asset allocation. Importantly, given the demographics you have,
09:51which is so much different than India, you have savings to investment over the decades to come.
09:57Who can bring the combination of investment banking, trading, and wealth management capability
10:02to Japan? That kind of setup. Well, in some respects, rule of law, that feels like the United States.
10:08And in Japan, much like Hong Kong, you can't tourist bank. You have to go three, four times a year,
10:14five, 10, 15 years running, 20 years running. And we have a fantastic partner in Mitsubishi.
10:20So the key piece of this is interest rates are part of it. Shareholder activism is part of it.
10:25Deregulation is part of it. And then the demography of folks living longer, they need to be able to
10:31generate a return to be able to live off their savings. Are you happy with the partnership?
10:35Love it. Nothing changes. Nothing changes. Continuity is so important. But we have done
10:432.0, where we trade a bunch of, we call it Alliance 2.0, where we trade a bunch of the FX.
10:49We've combined the research. And now we're starting to think about what 3.0 could look like.
10:54Oh, yeah. Very exciting. But again, one of the great things about Japan, and much like you're in Hong
10:59Kong and in India, there's no rush. 5, 10, 20, 30 years. But you need to have an installed base,
11:05and you need to make the visits. There's so many regulators in China here. I'm just wondering,
11:10what are you looking for in terms of China? And what could entice foreign banks like yourself to
11:16really ramp up investment in the mainland now? Well, I think there has to be some element of
11:22de-escalation at the policy level. And I think we're starting to see that. I think that's important.
11:28I think for most of the traditional Western firms, Hong Kong will be the natural gateway. There's no
11:34reason to change that. Getting back to your earlier excellent question with respect to underwriting,
11:39to the extent you can actually be a leader in accessing global capital by having contemporaneous
11:45A and H, okay, then you need to be able to bank the companies locally to make sure that there's the
11:50right kind of transparency. But then you can also try to find global investors to come in there too.
11:55So onshore, offshore, hybrid, I think very important for the asset management business,
12:00for the banking. You mentioned about India, which, as you say, is a, I guess, a long-term
12:05game. I'm just wondering, in terms of what you see for that market, could it actually overtake
12:10China when it comes to the fees pool? Do you see that ever happening?
12:13Well, ever is a really long, I mean, ever, I mean, we're, we're, we're, we're, we're, we're,
12:19we're just, we're just doing. We eat our vegetables, so we're hopefully going to live a long time.
12:22You're, you're, oh yeah, well, what does that make me? Like, you know, part of the plant here.
12:27You guys look a lot better than I do. I like India, but I like China. You don't have to make
12:33the choice. You have, you know, a billion five and a billion four and eight. I think that's the math,
12:39right? So that's a pretty big, you know, percentage of the global population denominator.
12:45They can both win. India can learn something from China, though, in terms of how to think
12:50about industry winners. This is the big change here now onshore. We're seeing real global winners
12:56in biotech, for example. I think India's watching that, figuring out how they can not just be the
13:01one plus, but they can start having category killers that don't just serve in domestic demand,
13:06because at some point they'll have a demographic challenge, right? It's just the nature of human
13:10history, but then how to be global competitors. These markets, it's an excellent point that you,
13:14you make with the comparison. These markets can learn from each other.
13:18Ted, we got to leave it there, but thank you. You guys are very good to see me.
13:21Chairman and CEO at Morton Stanley. Thank you, David.
13:23Thanks very much. Thank you. Thank you. Have a good day.
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