(Xinhua)
Updated: 2008-03-19 11:33

CITIC Securities, one of China's largest brokerages, formally confirmed on Wednesday that it had terminated a deal to invest in Bear Stearns, the US bank that was acquired by JP Morgan Chase & Co over the weekend.

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CITIC said that it had cancelled all negotiations on cross-investment and a proposed joint venture with Bear Stearns.

CITIC said that the basis and preconditions for strategic cooperation with the US lender no longer existed, but it added that it would seek other overseas opportunities.

Under an agreement last year, the two were to invest $1 billionin each other and launch a Hong Kong-based joint venture.

The statement from CITIC confirmed speculation that CITIC would drop the deal. "We will not carry out the deal -- the situation has changed," Tuesday's China Daily quoted CITIC group chairman Kong Dan as saying.

The share prices of CITIC Securities and Bear Stearns have dropped more than 50 percent since they agreed on the deal last November. At that time, the price of CITIC was about 105 yuan ($15) and that of Bear Stearns was $120. The prices had dropped to 56.14 yuan and $4.7, respectively, on Tuesday.

"It is good for CITIC to halt the proposed cooperation with Bear Stearns, and I am pleased with its decision," said Zuo Xiaolei, chief economist at Galaxy Securities. "Otherwise, it would suffer huge losses."

"Chinese financial institutions should do a better job in planning and research before making overseas investments in a bid to avoid risks," Zuo added. "'Blind' investment still widely exists in Chinese companies."

Wang Dongming, chairman of CITIC Securities, told the Financial Times that he and other top financial officials were keenly aware of the experience of Japan in the 1980s, when the country's firms went on a buying spree in the West.

He said Chinese firms were keen to avoid the mistakes made by Japanese investors by better localizing their businesses and properly utilizing talent in their target markets.

CITIC Securities is owned by CITIC Group. CITIC Securities' final earnings report for 2007, released on Monday, showed a five-fold increase in net profit to 12.39 billion yuan, or 4.01 yuan per share.