On Wednesday, Wall Street Journal reported that Morgan Stanley (MS) has restarted bond trading operations in Toronto, Canada. This move is indicative of the bank’s drive to expand in the Canadian market.
At the current level, Morgan Stanley has strengthened its foothold in the investment banking operations and equity trading business in Canada and is working with approximately 500 employees. Moreover, out of these workers, 400 are information-technology employees in Montreal, who are helping the bank in its global operations.
Previously, being primary dealers in Canadian government bonds, Morgan Stanley, along with The Goldman Sachs Group Inc. (GS) closed down their bond trading desks in Canada early last decade owing to their cost-cutting initiatives at that time.
Driven by the revival of the Canadian economy, major clients seem to be attracted to investing and trading in Canadian securities. Therefore, Morgan Stanley has come up with the decision to reopen its bond trading desk and further expand into the Canadian market.
Amid economic uncertainties related to the European debt crisis and the unprecedented downgrade of the U.S. credit rating in 2011, Canada has successfully maintained its fiscal position. During the recent economic and financial crisis, Canada’s economy experienced fewer woes compared to the economic condition of its peers.
Moreover, based on their strong capital holdings and conventional lending procedures, banks in Canada evolved from the 2008 financial crisis and Canada recorded marginal growth in 2010 and 2011. Further, a top rating was also maintained by the credit rating agencies for Canadian government bonds, though certain U.S. and European issuers of bonds faced a cut in their ratings.
Therefore, Morgan Stanley, considering such positives of the Canadian economy, strategizes to benefit from the growing demand of investors for Canadian debt globally.
Morgan Stanley currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we also maintain a long-term Neutral recommendation on the stock.
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