Q: These markets must be making life difficult for you Mike.

A: They definitely make it interesting. It reinforces the principal that we at Morgan Stanley have to be banking the long-term winners. In these volatile markets investors are extremely focused on differentiating the real winners from the also-rans. A company that is just a good story, which might have had a successful IPO in a bullish market, will find it very hard to have a successful offering in these kinds of markets. The bar is now much higher in terms of which companies investors are prepared to buy. So our sights are set on only working with the very best. That has been demonstrated if you look at every deal we have done since January 1 1999, every one of those deals is above issue price. Investors remember that. So we will see a lot of differentiation between not only the companies that investors are prepared to buy, but also investors will differentiate between which underwriters they are prepared to buy from.

Q: So do you only focus on generating returns for investors rather than raising money for issuers, in the process, selling the issuers bonds or stock cheaply?

A: Issuers have to be happy and investors have to be happy for a deal to be truly successful. You need to look at the longer-term performance. If a stock does well over a period of time, that is a measure of the company doing well. For example, Sina.com had a successful new issue and since then it has steadily increased in price, not in one fell swoop on day one. Our issuer clients feel very good about the deals we have done for them because when their issues perform in the aftermarket, that means investors will be more likely to buy their securities the next time around.

Q: What are you advising companies to do to help raise money in these volatile markets?

A: It is really company specific. It is more difficult for the early stage companies that might have successfully been able to go to market just a few months ago, to go to the market now. Investors want a longer track record before buying the equity. That is OK, its healthy. So we are working with them over a few more quarters so their offering will be successful later.
However, there are plenty of companies that can still get deals done in these types of markets ? equity or debt. We expect to raise more than $5 billion in the public markets in coming months. So although times are tough for second tier companies, the companies we are working with can go to market and will be able to raise equity and debt

Q: With the public markets so difficult, are companies now focusing on the private markets, through placements and strategic investments with private equity firms and others?

A Sure. There is definitely a tremendous amount of activity going on in the private markets with the public markets somewhat more difficult. Many of our financial sponsor and private equity clients are seeing good opportunities. I think that will continue for the next several months.

Q: Is Morgan Stanley investing in these companies on its own book?

A: We certainly have the ability to invest some of our own money through various funds or direct companies towards other private equity firms where it makes sense.

Q: How is the China Unicom IPO shaping up?

A: Well it is very much in the SEC process so it is hard for me to comment. But it does bear very close scrutiny over the next few weeks.

Q: Trying to secure a deal of that size in markets this volatile must be a huge challenge?

A: We are excited about our work with Unicom.

Q: Lets talk about the SEC. Are you happy with their demands and the whole process, even now when there is such a big backlog of deals waiting approval by them, which anyway will not get done?

A: The SEC process is a way of life for me. What I will say is that investors give a ton of credit and will pay for companies that are willing to go through the scrutiny of the SEC process. That level of scrutiny and disclosure is highly regarded and respected by institutions, as it is a sign that management is prepared to act using the highest global standards.

Q: Is that why valuations tend to be higher in the US that in the local markets in Asia because there is a premium put on good corporate governance and accounting standards?

A: That is definitely a meaningful part of it. It is governance, accounting standards, disclosure, managing towards shareholder value - it is all of those things and that gets reflected in the price. But at then end of the day investors are also focusing on company specific things such as growth and the scale of the business. So it is a bit simple to suggest that multiples in the US only reflect the listing in the US. It is also a reflection of company fundamentals and a leaning towards new economy names, which represent high growth and so have high multiples on earnings and revenue.

Q: So is the new economy dead?

A: No. This air out the new economy bubble is healthy. There are now companies in the old economy that represent terrific value. Cash flow is not dead. Cash flow is still a good thing. And the value inherent in companies that produce consistent cash and grow their earnings is very powerful. But with the new economy names, there is now a healthy differentiation between those that are going to be number one or two and the others.

Q: Are there any signs that you are looking out for that would indicate to you that we are nearing the bottom of this slump?

A: That?s a good question. Just as I don?t think anyone could point to when investor sentiment changed and the euphoria gave way to investor caution, I think it will be very hard to pinpoint when we are going to see changes in investor sentiment going the other way. Some people point to stabilization in interest rates. It is also important to see retail investors keeping their money in the stock market. So we need to see good fund flow numbers into stock market investments. But at the end of the day we are dealing with investor sentiment and emotion, and frankly the fervour had got a bit out of hand.

Q: Thank you.