CITIC Securities Co canceled a proposed US$1-billion investment in Bear Stearns Cos after the Wall Street brokerage was bought by JPMorgan & Chase Co, said the chairman of CITIC's parent company.
CITIC Securities, China's largest broker by market value, also scrapped plans for a joint venture with Bear Stearns, CITIC Group Chairman Kong Dan told Bloomberg News in an interview in Beijing yesterday. CITIC Group, China's largest investment company, owns 23.4 percent of CITIC Securities.
"We aren't carrying out the deal with them," Kong said. "The situation has changed."
Bear Stearns's 85 years as an independent company ended yesterday when Wall Street's fifth-largest securities firm agreed to be taken over by JPMorgan after running short on cash. Shares of CITIC Securities and Bear Stearns have fallen 50 percent since the proposed investment was announced in October.
"Clearly, CITIC Securities' investment in Bear Stearns wasn't a very good idea in the first place," Erwin Sanft from BNP Paribas Securities (Asia) Ltd said yesterday. "It's good for them," to back out of it.
As part of the deal with Bear Stearns, the US company was also expected to invest US$1 billion in CITIC Securities. Kong didn't say whether this investment, too, had been scrapped. CITIC Securities spokesman Raymond Tang declined to comment.
CITIC Securities rose 0.9 percent to 58.50 yuan (US$8.26) in Shanghai at the market close yesterday. The benchmark CSI 300 Index tumbled 4.6 percent to an eight-month low.
Financial stocks fell across Asia yesterday after JPMorgan agreed to buy Bear Stearns for less than a 10th of its market value and as the Federal Reserve's emergency move to reduce its discount rate on Sunday suggested the US central bank is concerned about a meltdown in financial markets.
Carlyle Group's publicly traded mortgage bond fund said yesterday it will apply to be liquidated after defaulting on about US$16.6 billion of debt.
"It's very much like a black hole," said Patrick Chang, a dealer at CIMB-Principal Asset Management Bhd in Kuala Lumpur. "We don't know what more is out there, or the extent of the damage. It's scary and depressing."
(Shanghai Daily March 18, 2008)
