Hong Kong: Morgan Stanley appointed chief economist Stephen Roach, who’s followed China’s economy for more than a decade, as Asia chairman as it seeks more mandates to handle takeovers and stock sales for Chinese companies.
Roach, 61, replaces Alasdair Morrison, who retired this month, according to an emailed statement. The appointment will come into effect in June and Roach will move to Hong Kong in September, the release said. He joined Morgan Stanley in 1982.
As New York-based chief economist, Roach followed China closely, often highlighting the dangers of the nation’s excessive reliance on exports and investment. In a 20 April report, he said Premier Wen Jiabao will likely succeed in cooling an economy that grew 11.1% in the first quarter.
“China is at a critical juncture in its extraordinary development saga—needing to make the transition from an export and investment-led growth dynamic to more of a consumer-led economy,” Roach said in an emailed response to questions.
“I am confident that China is up to this daunting challenge—but it will take both time and determination to pull it off.”
Morgan Stanley has been expanding in Asian markets including China, India, Korea and Japan. The firm last month announced it will pay $425 million (Rs1,785 crore)to buy out its joint venture in India with JM Financial Ltd, opting to go it alone in the world’s second fastest-growing major economy.
On 18 April, the world’s second-largest securities firm said it hired Blair Pickerell from HSBC Holdings Plc. to head its Asian investment funds unit.
Roach, who has a Ph.D. in economics from New York University “is an intellectual leader on many global economic issues, including those related to China,” chief executive officer John Mack said in the statement. “He will bring a combination of seniority, strategic thinking, and local knowledge to this important role.”
Morgan Stanley ranks second this year in advising on overseas share sales by Chinese companies, up from 10th in 2006. It doesn’t have a license to manage domestic stock offerings.
Morgan Stanley, the first overseas bank to buy a stake in a Chinese securities firm, owns 34% of China International Capital Corp (CICC). It surrendered management responsibilities at CICC in 2000 following a dispute with the Chinese company’s management, ceding an advantage to Goldman Sachs Group Inc. and UBS AG.
Goldman won regulatory approval in 2004 to set up an investment-banking venture with Beijing Gao Hua Securities Co. Goldman has management influence over Gao Hua through a loan made to its major shareholder, though doesn’t own a direct stake. UBS is close to winning final approval to invest $210 million in Beijing Securities Co.
As the only Wall Street investment bank currently allowed to manage domestic share sales, Goldman ranked third in China this year, after Bank of China Ltd and China Galaxy Securities Co. Ltd.
China’s economy has grown more than 10% in each of the past four years, and is poised to overtake Germany’s as the world’s third largest this year. It has surged more than tenfold in size since Deng Xiaoping began free-market reforms in 1978.
“I have been positive on China for a decade and remain so today,” Roach said.
He has been less bullish on the US economy. In a November 2005 interview, he predicted a 40% chance of a US recession in the following year.
The US economy expanded 3.3% in 2006, up from 3.2% in 2005.