Morgan Stanley in merger talks as fears grip financial markets

Hong Kong: Morgan Stanley topped the list of major financial services firms scrambling to sell themselves as fear gripped global credit and stock markets, and central banks rushed in $180 billion of extra liquidity.

Morgan Stanley was discussing a deal with US regional banking powerhouse Wachovia, according to a source familiar with the matter, while CNBC said HSBC Holdings and China's CITIC Group were eyeing the venerable Wall Street firm.

Lloyds TSB achieved a long-held ambition in Britain by scooping up the country's biggest mortgage lender HBOS in a $22 billion all-share deal to end a slump in HBOS shares prompted by fears about its funding.

HBOS shares jumped 29 percent, while the UK government promised to rewrite competition laws to let the deal go through.

Among possible buyers of Morgan Stanley, the Government of Singapore Investment Corp (GIC) said it would consider all possibilities, including taking a stake if approached.

A Morgan Stanley spokesman in Hong Kong declined to comment. A spokeswoman at HSBC, which this week became the world's biggest bank by market value, also declined to comment.

A senior executive at the Chinese group's CITIC Securities arm said his firm was not in any talks towards investment in Morgan Stanley. An official with the CITIC group could not be reached for comment.

With the financial landscape undergoing its most dramatic transformation since the Great Depression, potential takeovers lurked for No. 2 US investment bank Morgan Stanley and weakened top US savings bank Washington Mutual.

Early on Thursday, the US Federal Reserve announced measures worth up to $180 billion in a coordinated move with five of the world's major central banks to improve liquidity in global money markets, which gave some reassurance to panicked markets.