The headline seems eerily familiar, but the names have been changed. Morgan Stanley is desperate, disappointing financials spell doom for the company, and in sweeps China to inject $5 billion into the company.
And how do investors react? Once again, they applaud the selling of American equity.
Morgan Stanley announced today that it suffered its first quarterly loss in its 72-year history. Morgan Stanley lost $3.59 billion, or $3.61 a share. This loss was much more severe than what analysts were expecting, which was 39 cents a share.
Morgan Stanley further announced a $5.7 billion writedown, with John Mack, the company's CEO, calling it "disappointing" to the entire firm, the industry, and the company's shareholders.
As a result of the writedown and drastic losses Mack has announced that he will refuse to accept his bonus for 2007. Mack insisted that he be held at least partially accountable.
Yet, after all of this Morgan Stanley posted gains in early trading.
Along with the announcement of all of this poor news Morgan Stanley announced that it would raise $5 billion in capital from China.
China Investment Corporation is buying a stake in the company that represents slightly less than a 10% share.
While Morgan Stanley clearly needed the capital because of the losses the company cites another benefit from this sale, improved ties to China, the world's fastest growing economy. An economy, incidentally that this same day announced deregulations in its credit card industry, allowing foreign credit card companies to do more business in China.
Morgan Stanley represents just the latest financial company to report disappointing results. Just last month Citigroup made a similar deal with the UAE, raising $7.5 billion.
The UAE has also considered buying a 20% stake in an American stock exchange and China has looked into purchasing the financial company Bear Sterns. It would seem that the trend of American financials being bailed out (or bought out) has only just begun.
American Financials are for sale, and investors cheer as foreign interests buy them up (or out).