Morgan Stanley in talks to sell stake to China

Deals

Troubled US investment bank Morgan Stanley is in talks to sell a stake of up to 49% to China’s sovereign wealth fund, a newspaper reported on Friday, citing people close to the discussions.

The talks with China Investment Corp., or CIC, which bought a 9.9 per cent stake in Morgan Stanley in December, were “advanced but no deal had been clinched yet”, the paper said, quoting unidentified sources. Morgan Stanley top management prefer a stake sale to CIC to a merger with US lender Wachovia, according to the paper. The paper said CIC president Gao Xiqing had been scheduled to meet with Morgan Stanley executives in San Francisco.

Nick Footitt, Morgan Stanley spokesman in Hong Kong, declined comment when contacted by AFP Friday. CIC could not immediately be reached. CIC was established last year charged with managing $200 billion of China’s bulging forex reserves, and has become an iconic symbol of the country’s growing financial muscle as it scours the world for acquisition targets.

The Financial Times said the sale of a significant stake of a blue-chip Wall Street firm to a state-owned Chinese institution could cause a political backlash in Washington.

The Government of Singapore Investment Corp (GIC), one of the world’s largest sovereign wealth funds, said Thursday it would explore a possible stake in Morgan Stanley if the US investment bank made an approach. CNBC business network reported Thursday that Morgan Stanley was in talks to be bought by the Chinese bank CITIC.

The reports came in the same week that US investment bank Lehman Brothers filed for bankruptcy while another Wall Street firm, Merrill Lynch, was forced to sell itself to Bank of America for $50 billion. (The Economic Times)

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