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Sept. 21 – China Investment Corp, China’s State investment fund, is in discussions to purchase up to 49 percent of the prestigious Wall Street investment bank Morgan Stanley.
The bank has been battered over the past few weeks as its shares have dived during the financial storm that has emerged in the United States. Its survival has been cast in doubt, and a merger with U.S. banking lender Wachovia has also been proposed; however it is believed that a tie-in with CIC is preferred by Morgan Stanley’s senior executives.
CIC previously purchased 9.9 percent of Morgan Stanley last December.
However, whether or not the deal is approved by U.S. authorities is another matter, with the acquisition of an American financial institution by a Chinese fund being politically difficult. There is also the issue of attempted blocking by the Chinese of Coca-Cola’s desired acquisition of China’s Huiyuan soft drinks business, which has led to accusations of Chinese protectionism by many U.S. politicians. Blocking a CIC deal for Morgan Stanley in favor of Wachovia would make sense to these sentiments.
Goldman Sachs meanwhile is another firm whose stock and credibility has been badly hit, and it is believed that senior Chinese bankers are assessing to make a strategic bid for part of this firm also.
The latest is the Chinese are getting cold feet about this…either potential loss of face if they are turned down by the US regulators, a response to the markets recovering, baulking at the price or fear of the actual real value of the books should Morgan Stanley turns out to be a pup. The Chinese are also, it has to be said, very good at playing a waiting game when fire sales are in the offing.
More here – Morgan Stanley and Goldman Sachs who you both mention have just given up their Investment Bank status: http://www.guardian.co.uk/business/2008/sep/22/wallstreet.morganstanley
Some interesting commentary here from Jack Perkowski, Chairman of Asimco and author of “Managing The Dragon – How I’m Building A Billion Dollar Business In China”. Jack spent twenty years on Wall Street before getting into auto manufacturing – now with 17 factories here. His blog is always worth a read:
What China Can Learn From Meltdown Monday, Part One:
http://managingthedragon.com/index.php/2008/09/21/what-china-can-learn-from-meltdown-monday-part-i/
Wall Streets Meltdown & What It Means For China
http://managingthedragon.com/index.php/2008/09/17/wall-street%e2%80%99s-meltdown-and-what-it-means-for-china/