Winners rationale

Few client segments faced stronger headwinds than offshore Chinese investors in 2018, with turbulence in both the global equity and bond markets drumming up concerns over liquidity and risk management and the tightening capital flow environment in China. The MSCI China Index was down almost 19%, Chinese bonds posted a record year for defaults as trade tensions with the United States heightened, and the Chinese yuan depreciated by around 6% against USD.

In this challenging environment, Morgan Stanley Private Wealth Management stood out from its peers on account of its commitment and ability to deliver a market-leading global and Asian institutional platform and offering tailored to its Chinese clients, healthy performance, and a powerful research house that, in many ways, anchors the private bank’s proposition in this competitive space.

Clients benefitted from Morgan Stanley’s delivery of a wide range of pay-off structures and underliers to the China market with a focus on risk aversion across fund-linked notes, bonus enhancement notes, booster notes, and fixed coupon notes. Concurrently, its alternatives business experienced hefty contributions, reflecting Morgan Stanley’s ability to provide the segment with sought-after private market opportunities and established and emerging-name hedge funds, which are now supported by a revamped platform, enhanced due diligence and distribution.

Furthermore, Morgan Stanley’s capital markets business, underpinned by the bank’s market-leading equity research team, fared better than those of its peers amid a pronounced downturn in transactional activity. Justifying its much-vaunted reputation in the asset class, Morgan Stanley delivered high single-digit outperformance with its Hong Kong/China equity calls despite volatile Chinese markets. The bank’s FX capabilities also shone bright during the year, amid high demand for CNYUSD hedging — especially from Chinese clients who are active in their own businesses.

Investments aside, Morgan Stanley shrugged off its traditional conservativism when it comes to balance sheet deployment by expanding its financing capabilities in response to a growing need among Chinese UHNW clientele to unlock liquidity for strategic holdings. It has boosted its single share financing and securities lending businesses, once again leveraging the strong capabilities of its research team for effective delivery, and made it clear to active business owners that Morgan Stanley is the go-to provider for corporate solutions including hedging, financing, and treasury management.

Morgan Stanley Private Wealth Management’s China international business consequently experienced remarkable year-on-year revenue growth, leading to an impressive double-digit rate of reduction in cost-income ratio and two straight years of robust performance.

Morgan Stanley is Asian Private Banker’s Best Private Bank – China International for 2018.