Friday, September 19, 2008

China Investment Corp could buy large stake in Morgan Stanley. . .

. . . or Morgan Stanley could merge with Wachovia.

From the FT:

Morgan Stanley is in talks to sell a stake to China Investment Corp that could bring the state investment fund's total holding to to 49 per cent, as the Wall Street firm endeavours to ensure its survival and reverse a slump in investor-confidence.

People close to the discussions said the investment bank's top management preferred a stake sale to CIC to a merger with Wachovia, the troubled US lender that approached Morgan Stanley on Wednesday.

They added that talks with CIC, which bought a 9.9 per cent stake in Morgan Stanley in December, were advanced but no deal had been clinched yet.

Morgan Stanley's frantic attempts to find a partner come as its shares have been hammered by concerns over its ability to survive as one of the last two large investment banks. The stock, which has fallen 71 per cent over the past year, rallied to close up 3.7 per cent to $22.55 in New York.

Morgan Stanley executives believe that a tie-up with the cash-rich CIC, which was given $200bn (£110bn) to invest by the Chinese government last year, could help it to restore investors' faith in its business.

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