China's Citic says may not invest in Bear Stearns

Citic Securities said it might not proceed with a deal to invest about US$1 billion (S$1.4 billion) in Bear Stearns because of the United States investment bank's financial crisis.
China's largest listed brokerage said on Saturday 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 US 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 US 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 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,'
Last October, Bear and Citic Securities announced plans to invest about US$1 billion in each other and form a joint banking venture in Asia. Citic Securities was to obtain a stake of about 6 per cent in Bear, with the US bank getting about 2 per cent of the Chinese firm.

But since then, Bear's share price has plunged 74 per cent.
Citic Securities' shares have tumbled 45 per cent as China's stock market has slumped, hurting the Chinese firm's earnings outlook.
'We acknowledge that the subprime mortgage crisis in the US capital markets is continuing, so we will closely monitor the impact of the crisis on the investment deal,' Citic Securities said.
'At present, the two parties are still negotiating major terms of the deal and we have not completed due diligence on Bear Stearns. We haven't signed any formal agreement and we haven't paid any money.' Citic Securities did not say when its evaluation of the Bear deal might be completed.
Global markets have been speculating that cash-rich Chinese financial institutions might take advantage of the US subprime crisis to buy big stakes in foreign companies at cheap prices.
But the uncertainty over the Bear deal suggests Chinese firms may be wary.
In early March, Citic Group chairman Kong Dan said the Chinese brokerage was renegotiating the Bear deal in light of Bear's sliding share price, and might take a bigger stake than originally envisaged.
A revised deal with an investment of US$1 billion could have given Citic Securities up to 9.9 per cent, making it the largest single shareholder in Bear.
But on Wednesday, Mr Kong suggested that Citic Securities might now take the originally planned stake of 6 per cent while paying less than US$1 billion.
On Saturday, Bank of China said it was interested in acquisitions in the Asia-Pacific region and the Middle East, but was unlikely to look for bargains among Western financial institutions hit by the subprime crisis.
'We certainly will not buy into institutions like Bear Stearns,' said Mr Xiao Gang, chairman of China's fourth largest bank by assets.