The international market sees it as a big business move and
experts hail it as a deal in the right direction.
China Investment Corp (CIC), the country's sovereign wealth
fund, has injected $5 billion into Morgan Stanley within three
months of being set up.
"It's a good time for investment (in the US)," said Yin Zhongli,
a researcher with the Financial Research Institute of the Chinese
Academy of Social Sciences. "The credit crunch induced by the
subprime crisis in the US could help buyers get a real
bargain."
The director of the Institute of Finance and Banking, under the
Chinese Academy of Social Sciences, Li Yang, corroborated Yin.
Xinhua quoted Li as saying: "It's a good time to invest in US-based
financial institutions, many of which are being undervalued because
of the subprime crisis."
The equity that CIC has bought could be converted into as much
as 9.9 percent of Morgan Stanley's common shares in 2010. That
would make the Chinese company the second largest shareholder of
the US-based investment bank. The deal coincides with the first
quarterly loss suffered by Morgan Stanley after it went public in
1986.
But the Beijing-based sovereign fund said: "Morgan Stanley has
potential for long-term growth. This investment is made in
accordance with CIC's global asset allocation strategy and is
expected to realize attractive long-term returns."
CIC will, however, stay a "passive investor" and not seek a
management role in Morgan Stanley.
The Chinese firm doesn't foresee any political or regulatory
concerns over the investment, though.
"This agreement will provide capital for Morgan Stanley and thus
strengthen one of New York's premier companies. This will help New
York keep its position as the global financial center," said US
Senator Charles Schumer, a longtime critic of China's currency and
trade policies.
Morgan Stanley on Wednesday reported a higher-than-expected
writedown of $9.4 billion in the fourth quarter, largely because of
the losses in subprime mortgages and other assets. The writedown
means a $3.6-billion loss for the bank in the fourth quarter.
CIC was set up with an initial capital of $200 billion from the
nation's foreign exchange reserves.
(China Daily December 21, 2007)
