Morgan Stanley became the third top bank in a month to raise capital from a sovereign wealth fund after announcing higher-than-expected writedowns of $9.4bn due to subprime losses. John Mack, chief executive, said that the $5bn capital injection from China Investment Corporation would bolster its balance sheet and strengthen its ties in China. Morgan Stanley follows Bear Stearns in finding a big Chinese investor. China’s newly formed SWF, which earlier this year paid $3bn for 10% of Blackstone, the US buy-out group, will get a stake of up to 9.9% in Morgan Stanley. Morgan Stanley does not foresee regulatory concerns but on Wednesday night Christopher Dodd, head of the Senate banking committee, called for more details of the deal, including whether a national security-related review is warranted. Mack said he would not accept a bonus this year because of the writedowns and said the group would be “much more cautious” on larger risks in 2008.

This entry was posted by Gwen Robinson on Thursday, December 20th, 2007 at 5:53 and is filed under Capital markets. Tagged with morgan stanley. Edit this entry.