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Morgan Stanley stokes sale fears
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 (Dh660.6 billion) of extra liquidity.
- Agencies
- Published: 00:18 September 19, 2008
Hong Kong/London: 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 (Dh660.6 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 per cent, 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, though a source said the bank wasn't interested.
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 yesterday, 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.
Resilience
The MSCI index of Asia stocks excluding Japan, which had been down almost 5 per cent, was down 0.85 per cent after European markets opened, while Tokyo shares were 2.22 per cent lower. Hong Kong's Hang Seng index turned positive, having earlier fallen more than 7 per cent.
European banking shares, which had been indicated to open sharply lower, showed resilience in early trade, with the DJ Stoxx banking index up 2 per cent, helped by the leap in HBOS stock and strong gains for Swiss banks UBS and Credit Suisse.
But Russian stock markets remained closed for a second day, with authorities unable to say when they would reopen.
"After the bailing out of AIG failed to reassure the market, it is difficult to imagine what could really stop the un-orderly de-leveraging that is going on," French investment bank Calyon said in a note yesterday.
Panicked matchmaking followed the surprise $85 billion rescue of insurer American International Group by the US Federal Reserve on Tuesday that did little to calm investors' nerve, with financial shares bludgeoned.
Shares in Macquarie Group, Australia's biggest investment bank, skidded 23 per cent to their lowest level in more than five years amid funding worries.
Industrial and Commercial Bank of China, which had been the world's most valuable bank until being surpassed by HSBC on Wednesday, fell nearly 14 per cent, though later recovered all their losses to stand slightly higher.
"Stop The Insanity," pleaded a research note from Swiss bank UBS as US financial shares appeared to be in free-fall. The US stock market plunged 4.7 per cent to a three-year low and the dollar slumped, while gold and oil soared.
Lending between big banks was essentially frozen by cash hoarding and mistrust, creating crises of liquidity and confidence. Overnight US dollar lending rates have soared this week and traded as high as 8.5 per cent yesterday. Japan and Australia also pumped an extra $17 billion into money markets yesterday to prevent banks from hoarding cash.
"Banks are reluctant to lend money to each other, everybody seems to sit on stockpiles of cash," said Markus Ammann, a trader at Bayerische Hypo und Vereinsbank in Hong Kong.
The AIG rescue capped a week of bailouts, bankruptcy and moves by central banks around the world to flood the financial system with funds to prevent it from seizing up.
Shares of Morgan Stanley and larger rival Goldman fell as much as 43 per cent and 27 per cent, respectively, even after both reported better-than-expected quarterly earnings.
The cost of protecting debt in both spiked, reflecting fears that their debt issues are no safer than junk bonds.
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