China's CITIC Securities said today it could not guarantee it would complete a deal to invest about $1 billion in Bear Stearns given the US investment bank's financial crisis.
Yesterday, Bear Stearns received a massive emergency bail-out from the US Federal Reserve and JPMorgan Chase after admitting its liquidity position had deteriorated.
The move underlines the Fed concerns at the depth of the credit crunch and its determination to prevent a major bank failure.
"Our company has noticed the recent financing arrangement between Bear Stearns, JP Morgan Chase and other financial institutions, and we have also considered factors including the sharp fall in Bear Stearns' share price," said CITIC Securities, China's largest listed brokerage.
"We cannot guarantee reaching a final agreement in the future," it said in a statement. Last October, Bear and CITIC Securities announced plans to invest about $1 billion in each other and form a joint banking venture in Asia.
The potential damage from Bear Stearns' meltdown on US states, cities and agencies goes well beyond its role as one of the leading underwriters in the $2.6 trillion US municipal bond market.
The bank also is a counterparty for interest rate swaps, which issuers use to guard against unexpected shifts in rates. And public pension funds could own stock in Bear Stearns, whose price plunged 46 per cent yesterday, analysts said.