Mitsubishi UFJ Morgan Stanley Securities (MUMSS) has kicked off the new year with a lackluster showing in the Japanese market, ceding its number one tranche provider status to Nomura.
The structured product provider edged out rivals Nomura Securities, Mizuho Investors Securities, Okasan Securities and Tokai Tokyo Securities for seven months of 2011 to become the most active provider for the year.
After distributing 102 products worth ¥799.6bn ($10.3bn) last year including Nikkei-linked notes (48), JPY/AUD-linked dual currency notes (28) and callable corporate bonds (14), MUMSS managed to only issue a single callable bond in January.
The remarkable decline in the company's January issuance was attributed to management changes announced last year by Morgan Stanley. Chief executive James Gorman said rebuilding the investment bank's fixed income sales and trading business was the firm's first priority. The bank subsequently reshuffled the management of its fixed-income division early last year. Under the new regime, the bank has switched from an over-reliance on capital-intensive structured products to more flow business. The bank has been more conservative with risk, slamming on the brakes mid-year which has affected its offerings in the Japanese structured products market.
However, MUMSS provided eight notes worth ¥155.3bn ($1.99bn) in February, indicating its fall from the top provider slot may be temporary.
Typically, Japanese security companies structure products according to investor demand and then select a bond issuer before distribution. The active bond issuers in the structured products market are mostly Scandinavian issuers such as Kommunalbanken, Kommuninvest and Municipality Finance because of their perciebed higher credit ratings.
SRP believes MUMSS's recent decline in issuance could be due to the fact that it does not issue bonds on its own and that this may be a potential line of business for the company to be involved with such issuances in the Japanese market.
Mitsubishi UFJ Financial Group (MUFG) and Morgan Stanley entered into a securities joint venture in May 2010 as part of their global strategic alliance. MUFG holds a 60% interest in MUMSS while Morgan Stanley holds a 40% interest, making MUMSS a consolidated entity of MUFG.