J.P. Morgan Chase plans to storm into a top three position in Asian equity market league tables within the next three years and hopes to differentiate itself by promoting innovative structures, such as equity-linked products, equity derivatives and credit derivatives. Michiel Steenman, Hong Kong-based head of equity capital markets for Asia Pacific, acknowledged the firm is bulking up late in the game, but added that Chinese deals are expected to account for a large portion of new Asian business.
The firm will hire bankers, product specialists and analysts as well as begin to actively market itself to government officials and private corporations, Steenman explained.
Steenman highlighted a recent Telecom Italia exchangeable bond underwritten by J.P. Morgan as the type of unique product it will seek to promote. That issue featured a structure dubbed OPERA, which permitted bondholders to exchange bonds into either Telecom Italia shares or shares of its mobile phone subsidiary. OPERA stands for Outperformance Equity Redeemable in Any Assets notes.
J.P. Morgan has developed a similar structure called Chinese Opera, which it is marketing to state-owned enterprises as well as private corporations. The firm plans to leverage its strong fixed-income, mergers and acquisitions and brokerage platforms to gain further access to the Chinese markets.
Prior to their merger, neither J.P. Morgan nor Chase Manhattan had an Asian equities business. Jardine Fleming had a small business, but did not possess the bulge bracket pedigree, said Steenman, who comes from Fleming. With the combination of the three firms, Steenman believes J.P. Morgan can compete with the current market leaders Goldman Sachs, Morgan Stanley and UBS Warburg. He said J.P. Morgan's senior investment banking executives have been visiting Hong Kong and China to demonstrate the firm's commitment to the region and that it is planning to host some China-focused conferences as well.
