Merrill Courts Foreign Investment

by Stewart Douglas

Story link: Merrill Courts Foreign Investment

Investment bank Merrill Lynch has today received a boost following reports that a foreign based investor may be preparing to inject some $5 billion worth of capital into the bank with a view to providing further investment funds for the equity group.

Asian based investor Temasek Holdings has today announced it may be prepared to invest somewhere in the region of $5 billion in to Merrill Lynch, in a move that propped share prices beyond $55.69 per share, adding over 2% to their value on the day’s trading.

The move would see yet another injection of foreign capital designed to help bail out sub-prime hit institutions, which many market analysts have suggested are opportunistic attempts to capitalise on depressed equity values in the wake of the summer sub-prime collapse.

It is thought that the capital injections will e used to replenish reserves, which have become seriously depleted around the industry as a result of widespread sub-prime linked writedowns.  Market analyst Douglas Sipkin was today optimistic about the move that would see a further cash injection into credit crunch-affected Merrill.

“We suspect [Merrill Lynch's] current capital position is adequate from a regulatory standpoint, but…its position is likely not sufficient from an industry competitive standpoint without a deal”, said Sipkin in a memo to investors this morning.

Similarly, rival bank Morga Stanley announced on Thursday it was to sell $5 billion worth of equity to China Investment Corp following further revelations of its sub-prime exposure.  It remains to be seen whether other foreign investment funds will look to capitalise on the current problems being experienced within the market, and whether more investment banks will be looking to offload equity in return for much needed funds.