Funds News
- China fund buys into Morgan Stanley
Date: 21-Dec-2007 Sources: (Shenzhen Daily)
CHINA Investment Corp. (CIC), a State-controlled investment fund, has snapped up a US$5 billion stake in Morgan Stanley, one of the biggest investment banks in the United States.
Morgan Stanley said CIC would gain around a 9.9 percent shareholding in the storied U.S. bank and securities firm, which announced Wednesday a net loss of US$3.59 billion for its fourth quarter.
Domestic firms have been making increasingly aggressive investments in some of America's premier financial companies this year. CIC grabbed a US$3 billion stake in Blackstone Group, a large U.S. private equity firm, earlier this year and Shanghai-listed CITIC Securities Co. bought a 6 percent shareholding in Bear Stearns, another U.S. investment house, for US$1 billion in October.
CITIC Securities' and CIC's move came as Wall Street reels from a prolonged U.S. housing downturn and heavy losses related to mortgage securities.
The mortgage losses and economic uncertainty have depressed the stock prices of many big U.S. banks in recent months, including Morgan Stanley.
CIC's move sees China become one of the biggest shareholders in a renowned U.S. firm, which traces its roots to 1854. John Pierpont Morgan was considered the United States' unofficial central banker in the late 1800s and famed for helping reorganize the country's railroads.
Morgan Stanley's financial picture darkened as it announced it was writing off US$9.4 billion, which it mainly blamed on loss-making mortgage investments, including subprime home loans granted to Americans with poor ratings.
John Mack, Morgan Stanley's chairman and chief executive officer, said CIC's cash infusion would bolster the bank's stretched finances. CIC controls a US$200 billion investment fund.
'The writedown Morgan Stanley took this quarter is deeply disappointing,'Mack said, adding that he had put a new management team in place and would not accept a bonus for 2007.
Speculation mounted over whether Mack would keep his job amid the mounting losses.
Mack said the bank had 'a longstanding commitment to China?and had helped raise US$45 billion for Chinese clients on international markets since 2000.
Morgan Stanley stressed that CIC would have 'no special?rights of ownership and no role in Morgan Stanley's management. It described CIC as a long-term investor and said it had purchased so-called equity units, which will convert into shares.
Sponsor Results:
