China's stocking stuffer for Morgan Stanley

Posted by: Frederik Balfour on December 20, 2007

China’s $200 billion sovereign wealth fund has clearly gotten into the seasonal spirit of giving. The $5 billion investment it’s making in Morgan Stanley is quite the little stocking stuffer that ought to help take some of the sting out of a nearly $9.4 billion fourth quarter write-down on U.S. subprime and other mortage investments. It could also suggest that Morgan Stanley’s guanxi in Beijing is looking better than it has for some time.

At least that’s the idea I got after coming away from a Christmas lunch for reporters that Morgan Stanley hosted the day after the deal was announced. You can imagine our mild frustration that the meal was entirely off the record, so, dear reader, please don’t be frustrated with me if I find it impossible to substantiate my conjectures here.

But I will share with you an impression I had from discussions with unidentified individuals who tucked into a meal of roast beef, Yorkshire pudding, turkey with cranberry sauce, stuffing and baby potatoes, all heaped onto one plate. Was the restaurant, an upscale eatery called the Box in the heart of Hong Kong’s financial district, going green on us by trying to reduce its carbon footprint by minimizing its dishwashing load?

Anyway, it seems that Morgan Stanley started wooing the China Investment Corporation, with its $200 billion war chest, last August, about the time it was officially established. That clearly suggests chief executive John Mack, who is no stranger to Beijing, saw the writing on the wall long before the rest of us. Plenty of credit should also go to Mack loyalist and Morgan Stanley’s number one rainmaker in China, Wei Christianson. Christianson, who left Morgan Stanley in 2002 along with Mack, rejoined the team in early last year after Mack took over the helm.

One should not underestimate the role played also by Steven Roach, Morgan Stanley’s former chief economist who this summer moved to Hong Kong from New York to become Morgan Stanley Asia Chairman. Apparently he is an old buddy of Lou Jiwei, who served as vice finance minister before being appointed to run CIC, who like Roach, speaks fluent econometrics.

Reader Comments

Andy

December 21, 2007 1:28 AM

For the sake of Morgan Stanley and US economy, I hope the protectionism sentiments in Washington DC are not trying to block this deal.

Holly Garfield

December 23, 2007 10:07 PM

Sovereign funds investing in US financials are a double benefit for the countries. Financial prices are down, and beefing up the dollar helps emerging markets with US exports and energy imports. It increases global stability on top of that. That makes it a win all around.

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