By George Chen
SHANGHAI (Reuters) - CITIC Securities (600030.SS: Quote, Profile, Research) said on Saturday it might not proceed with a deal to invest about $1 billion in Bear Stearns (BSC.N: Quote, Profile, Research) because of the U.S. investment bank’s financial crisis.
China’s largest listed brokerage said it would “conduct an overall evaluation” of the deal after Bear, saying its liquidity position had worsened, obtained on Friday an emergency funding arrangement with the U.S. Federal Reserve and JPMorgan Chase.
Any cancellation of the CITIC deal would be another blow to Bear, the smallest of the major New York investment banks and the most reliant on slumping U.S. mortgage markets. It has been counting on the investment to boost its capital.
“Our company has noticed the recent financing arrangement between Bear Stearns, JPMorgan Chase (JPM.N: Quote, Profile, Research) and other financial institutions, and we have also considered factors including the sharp fall in Bear Stearns’ share price,” CITIC Securities said.
“We cannot guarantee reaching a final agreement in the future,” it said in a statement emailed to Reuters in response to media enquiries.
Last October, Bear and CITIC Securities announced plans to invest about $1 billion in each other and form a joint banking venture in Asia. CITIC Securities was to obtain a stake of about 6 percent in Bear, with the U.S. bank getting about 2 percent of the Chinese firm.
But since then, Bear’s share price has plunged 74 percent. CITIC Securities’ shares have tumbled 45 percent as China’s stock market has slumped, hurting the Chinese firm’s earnings outlook.
“We acknowledge that the subprime mortgage crisis in the U.S. capital markets is continuing, so we will closely monitor the impact of the crisis on the investment deal,” CITIC Securities said. Continued…
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