Morgan Stanley Said to Withdraw from CICC

Morgan Stanley was reported to sell the 34.3% stake in China International Capital Corporation (CICC) again.

Bain Capital and General Atlantic are likely to bid for the stake. Once such a stake is transferred, Morgan Stanley is to recover about USD 12 billion to USD 15 billion. When asked of the story, CICC and Morgan Stanley did not give any detailed information.

In 1995, Morgan Stanley, China National Investment & Guaranty Co. and China Jianyin Investment Co. jointly set up China's first Sino-foreign investment bank CICC. Morgan Stanley and the top management of CICC often had different opinions about the routine operation, enterprise culture and customer relations of the joint venture.

Last year, Morgan Stanley decided to sell the remaining 34.3% stake that it takes in CICC to Bain Capital and General Atlantic-led investment consortium, but the deal failed due to a lower price offered by the potential buyers.

After selling the stake in CICC this time, Morgan Stanley is guessed to set up an investment bank in partnership with a small Chinese broker called China Fortune Securities Limited, in order to have a stronger say in the management of the upcoming new company and to launch the underwriting business in China's Mainland via the joint venture. Still, it remains a puzzle whether China Securities Regulatory Commission is to approve of the establishment of the joint venture.

Actually, Morgan Stanley in 2007 had sold a 9.9% stake of CICC to China Investment Corp. (CIC) for USD 500,000. As one of the biggest sovereign wealth funds in world, CIC was established in 2007 with registered capital of USD 200 billion.

The Beijing-based company made most of the investment in financial products portfolios at the initial period of its operation. Such investment strategy enables investment in various target companies engaged in multiple sectors in different countries so that the investment risks could be dispersed.

However, the Beijing-based investment company was heavily stung by the investment in Blackstone Group and Morgan Stanley, due to the global financial crisis. Last year, it adjusted the investment strategy, thus having minimized the investment losses.

This year, CIC has further boosted its investment in such areas as the bulk stock, real estate and so forth. In addition, the infrastructure is another new investment sector of it. Besides, the investment target of CIC also includes energy and resources-related enterprises.

(USD '1 = CNY 6.82)

Source: www.nanfangdaily.com.cn (November 06, 2009)

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