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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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From: clutterer	7/30/2007 2:18:01 PM
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Morgan Stanley Credit Rating Raised One Level to `AA-' by S&P By Christine Harper July 30 (Bloomberg) -- Morgan Stanley's credit rating was raised one level to AA- from A+ by Standard & Poor's, which said improvements in the firm's ``competitive position'' will enable it to ride out market declines. Morgan Stanley ``should be able to maintain satisfactory earnings even if market conditions are considerably more challenging,'' S&P said in a statement today. It cited improvements at Morgan Stanley's fund management and retail brokerage divisions, which ``should ultimately make these units more substantial earnings contributors.'' The cost of insuring against the risk of a default by Wall Street firms soared last week on concerns they will be hurt by losses on subprime mortgages and corporate debt. Investors are fleeing corporate credit at the fastest pace in seven years, Barclays Capital said in a report today. The rating upgrade is ``a message to the market that all is not so dire,'' said David Hendler, an analyst at CreditSights Inc. in New York who recommends buying Morgan Stanley debt. ``You've got to view this as bullish.'' Morgan Stanley is the world's second-biggest securities firm by market value after Goldman Sachs Group Inc. Shares of the Amex Securities Broker/Dealer Index, which includes all of the five biggest U.S. securities firms -- Goldman Sachs, Morgan Stanley, Merrill Lynch & Co., Lehman Brothers Holdings Inc. and Bear Stearns Cos. -- has dropped 3.7 percent this year. The ratings change for Morgan Stanley comes nine months after S&P lifted the credit ratings of Merrill and Goldman Sachs to AA-, the fourth-highest position on S&P's rating scale, and boosted the rating on Bear Stearns to A+. S&P changed its outlook on Morgan Stanley's credit rating to ``stable'' from ``positive.'' The firm's commercial paper rating was also raised to A-1+ from A-1. Shares of the New York-based company fell 47 cents to $63.90 at 1:30 p.m. in New York Stock Exchange composite trading.

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