Thursday, February 7, 2008

China's state investment company to invest $5 bln in Morgan Stanley

China's state forex investment company to invest $5 bln in Morgan Stanley

December 2007

China Investment Corp. (CIC), the nation's state-owned forex investment firm, said that it has agreed to invest 5 billion U.S. dollars in the No. 2 U.S. investment bank Morgan Stanley.

It will purchase equity units that are mandatorily convertible into 9.9 percent of Morgan Stanley common shares.

The equity units carry a fixed annual interest rate of nine percent before conversion on Aug. 17, 2010.

Morgan Stanley reported a larger-than-expected loss in the fourth fiscal quarter due to a 9.4-billion-U.S. dollar write down from its exposure to subprime and other mortgage-related investments.

It lost 3.61 billion U.S. dollars in the fourth quarter, compared to a profit of 2.27 billion U.S. dollars in the same period a year earlier.

"CIC believes that Morgan Stanley has potential for long-term growth, particularly in its investment banking, asset management and wealth management businesses, as well as new business development opportunities in emerging markets," said the statement.

China Investment Corp. was set up in September this year, with an initial capital of 200 billion U.S. dollars from the country's massive foreign exchange reserves.

One-third of the capital would be used to purchase Huijin Investment Co. an investment arm of the Chinese government, and another third would be injected into state-owned banks for shareholding reforms, CIC chairman Lou Jiwei said.

The remaining 70 billion U.S. dollars was earmarked for overseas investment in a wide range of portfolios but would not seek control, he said.

Earlier this month, CIC made its second investment this year of about 100 million U.S. dollars in the initial public offering of the China Railway Group in Hong Kong.Its first investment is 3 billion U.S. dollars in Blackstone group public offering.

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