CITIC Securities Co, China's largest brokerage by market value, said the company "can't guarantee" that it will reach a final agreement on a proposed investment in Bear Stearns Cos.

CITIC hasn't signed any "formal agreement" or made any payment, it said in a statement. CITIC will pay US$1 billion for six percent of Bear Stearns, while the New York-based firm would invest the same amount in CITIC, Bear Stearns said in October.

The subprime mortgage meltdown in the United States has prompted increasing concerns from China's cash-rich CITIC Securities. The statement comes as a signal that the Beijing-based company may become more prudent in its cooperation with Bear Stearns, according to Bloomberg News.

"Our investment and cooperation plan is based on the condition that there isn't any abnormal financial situation with Bear Stearns," said Kong Dan, chairman of CITIC Group, the parent of CITIC Securities, on March 12 in Beijing.

Bear Stearns may be bought by JPMorgan Chase & Co after receiving emergency funding last Friday from the Federal Reserve and JPMorgan in the largest government bailout of a US securities firm. Bear Stearns' share price plunged a record 47 percent to US$30 in New York.

"Bear Stearns' prime task now is to save itself," said Victor Wang, a Hong Kong-based analyst at UBS AG. "CITIC is telling investors it hasn't put any cash into Bear Stearns and it will be very careful with the investment."

CITIC Securities said it will conduct an overall assessment of Bear Stearns' "most recent situation" before "determining the direction" and the next stage of their planned cross-investment and cooperation.

As part of the transaction, Bear Stearns and CITIC Securities had agreed to team up to sell financial products and services in China, and to set up a Hong Kong-based joint venture for other Asian markets. "A joint venture is still possible because CITIC wants to go international and learn from investment banks in the US," Wang said. "And a joint venture is an independent legal person, free from Bear Stearns' liabilities."

The Beijing-based brokerage's approach toward overseas investment may also take into account that this year, China's securities companies may not reproduce their 2007 earnings, with the benchmark CSI 300 Index falling 22 percent so far in 2008.

"The trading volume of all equities so far this year is about half of what the market expected," said Leo Gao, who helps manage the equivalent of US$2.3 billion at APS Asset Management Ltd in Shanghai.

The daily trading volume of China's stocks fell to 9.66 billion shares this year from 11.2 billion in 2007.

(Shanghai Daily March 17, 2008)