Thursday, December 20, 2007

Morgan Stanley Needs Better Fung Shui

We have Citigroup being carved up for Asian owners, then it was Bear Stearns, followed by UBS, and now Morgan Stanley. This wave would gain momentum and we should see even more financial giants having a rich Asian sovereign wealth fund or cash rich Asian company as a substantial shareholder - the new affirmative action policy?? Financial giants are sought after because of their global footprint and ease with leverage. Plus it brings the shareholders access to "certain unique technology, up to date financial innovations" thus bringing them access to global best practice in possibly the most influential sector in the business world.

Morgan Stanley shares closed up US$2.01 at US$50.08 on the New York Stock Exchange, even as Morgan Stanley executives offered a sobering outlook and warned that its credit and mortgage business would slow.The bank would suspend buybacks as it reviews its capital levels and investment plans. Mergers and leveraged buyout activity also is expected to slow. The slowdown in some businesses means Morgan Stanley, which announced 900 layoffs in recent weeks, may cut more jobs and shift resources to other, faster-growing areas.

The newly set up China's sovereign wealth fund, CIC, has snapped up a $US5 billion stake in Morgan Stanley, one of America's biggest investment banks. China Investment Corporation (CIC) would gain around a 9.9% shareholding in the storied US bank and securities firm which announced a net loss of US$3.59 billion for its fourth quarter.

CIC grabbed a US$3 billion stake in the Blackstone Group, a large private equity firm, earlier this year and China's CITIC Securities Co Ltd bought a 6% shareholding in Bear Stears for US$1 billion in October.

Morgan Stanley's quarterly loss amounted to US$3.61 per share compared with the same period a year earlier. The bank also reported negative quarterly revenues of US$450 million compared with US$7.85 billion. Last month, Morgan Stanley said traders betting the bank's own capital had incurred US$3.7 billion in losses on U.S. subprime mortgages. On Wednesday, the bank disclosed another US$5.7 billion in write-downs, reflecting further declines in the mortgage trades and losses on other debt. To restore its capital, Morgan agreed to sell equity units that pay a 9 percent coupon. China will be a passive investor.


Boon said...

Hello Dali!

This is Boon. I hope you are doing fine. Just to leave a note saying that I will be closing my Trade Bursa Malaysia blog soon. I am not very interested in stocks these days and had been selling a US recession story just before and when the DJIA made the peak at around 14100. I don't quite see myself talking about stocks in 2008. Therefore, is time for me to move on. Might start a new blog though. Currently, my fund is mainly allocated to FX and commodities.

I am already back in the UK from China but will remain in holiday mood. You know, Christmas is coming, and Christmas is a big thing here in the UK.

Keep up the good work. Merry Christmas + Happy New Year!

Best wishes

Salvatore_Dali said...


Good luck in yr ventures, I am certain u will be successful. Well, the biz blogs are getting less n less with Seng also leaving his Fusion Investor. Good luck.


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