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Bear Stearns Eyes Stake in China Fund Firm

Wall Street investment bank Bear Stearns is in talks to buy about a 10 percent stake of China's biggest fund house in a move aimed at tapping the country's red-hot mutual fund market, two sources with knowledge of the situation told Reuters on Thursday.

China Asset Management, which is 100 percent-owned by CITIC Securities, China's top brokerage, has been in talks with several potential foreign investors for a while and Bear Stearns is likely to win the deal, said the sources, who have been briefed on the talks.

China Asset Management has agreed to merge with CITIC Fund Management, which is also 100 percent-owned by CITIC Securities, before it gets a foreign partner, said the sources, who declined to be identified as they were not authorized to speak to media before a deal has been reached.

Bear Stearns , battered by a mortgage market slump, had already announced on Oct. 22 that it and Beijing-based CITIC Securities would take investment stakes in each other and form a broad strategic alliance.

A Bear Stearns spokeswoman declined to comment, while officials at China Asset Management confirmed the company was looking for a foreign partner but declined to name any potential investor.

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