Morgan Stanley, the second-biggest securities firm in the United States, is considering selling a larger stake to China Investment Corp and is in talks about a possible merger with Wachovia Corp, the fourth-largest United States bank, according to an insider.

China Investment Corp, the state-controlled investment fund, bought a 9.9-percent stake in Morgan Stanley in December after the New York-based investment bank reported a quarterly loss. The Chinese mainland fund could buy as much as 49 percent of Morgan Stanley, the insider said, Bloomberg News reported.

John Mack, Morgan Stanley's chief executive officer, is said to have received a call from Wachovia yesterday indicating interest. Talks about a deal with Wachovia have "advanced," broadcaster CNBC reported.

Morgan Stanley's shares slid for an eighth consecutive day, down US$1.84, or 8.5 percent, to US$19.91 in New York.

The New York-based firm is also seeking ways to limit short sales of its stock, the person said.

Broadcaster CNBC also reported that Morgan Stanley was in talks with China's Citic Group.

Jeanmarie McFadden, a spokeswoman at Morgan Stanley in New York, declined to comment on the CNBC report, which also said that HSBC was a possible suitor.

Morgan Stanley and Goldman Sachs tumbled the most yet on Wednesday as the deepening credit crunch fueled concerns about their ability to fund themselves without the access to deposits that banks have. A deal involving Morgan Stanley would leave Goldman Sachs as the only independent Wall Street investment bank, after Merrill Lynch sold itself to Bank of America.

Morgan Stanley and Goldman have defended their business model, saying they have adequate capital.

(Shanghai Daily September 19, 2008)