Morgan Stanley (MS) to See Record Japan Income as Trading Revives
As the Bank of Japan’s steps to loosen its grip on bond yields have helped fuel a trading revival in the world’s third-largest economy, Morgan Stanley MS expects to record its highest-ever income from the region. The news was reported by Bloomberg.
In an interview, Alberto Tamura, the CEO of Morgan Stanley MUFG Securities Co., said, “This could be the highest ever revenue year.” Notably, Morgan Stanley MUFG Securities is a joint venture between Morgan Stanley and Mitsubishi UFJ Financial Group, Inc. MUFG.
MUFG bought a 20% stake in Morgan Stanley in 2008, following which, Morgan Stanley MUFG Securities and Mitsubishi UFJ Morgan Stanley Securities were set up.
Tamura added that the joint ventures between MS and MUFG are likely to find more areas of collaboration in Japan and elsewhere but there is no plan to fully merge the two firms.
In recent months, the Bank of Japan has taken measures to liberate the debt market from years of its control, which has cheered investors in the region. The policy tweaks have helped breathe life into Japan’s once-sleepy government bond market, generating more trading business for various firms.
In addition to this, growing expectations that the central bank will scrap negative interest rates next year are likely to spur client activity in the nation.
This is the first time since May that asset managers have turned bullish on the yen on expectations that the Bank of Japan will end its ultra-easy monetary policy in 2024.
Recently, Bank of Japan’s governor Kazuo Ueda said that the chances of achieving the inflation target have been gradually rising. Bank of Japan would consider changing policy if prospects of sustainably achieving the 2% target increases “sufficiently.”
Ueda added, “If the virtuous cycle between wages and prices intensifies and the likelihood of achieving our price target in a sustainable and stable manner rises sufficiently, we will likely consider changing policy.”
If Morgan Stanley, together with MUFG, can record what it expects in Japan, it will reach its goal of overtaking Nomura Holdings as the top broker in the country.
Tamura said, “I think we are going to be in a position to become the top securities firm in Japan.”
Over the past six months, MS shares have gained 9.5% compared with the industry’s 15.1% rally.
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Currently, MS carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Like Morgan Stanley, Barclays PLC BCS expects another year of record profit in Japan on the back of the country’s debt and rates market trading resurgence.
According to Kosuke Morihara, the managing director and chief operating officer for Barclays Securities Japan Limited, BCS’ Japan entities are getting more yen rate-related orders from home and abroad, with many overseas institutional clients betting that local interest rates will rise.
Morihara said, “Profit after tax could reach an all-time high if there is no material change in the market situation. Japan has finally come to the center of the radar of global investors for the first time in a while.”
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