Morgan Stanley Shares Fall on Investor Fears

October 01 00:00 2011

New York, October 1 ( – Morgan Stanley (NYSE: MS) seems to be next in line of banks losing investor confidence. Its stock plunged more than 10 percent as investors are getting more and more worried about its exposure to the European debt crisis. The price of credit insurance on its debt also rose to the highest level since 2009 with the result that some hedge fund clients reduced their exposure.

Morgan Stanley shares fell $1.58, or 10.5 percent, to $13.51. Moving ahead of a broader slide in bank shares, its shares have fallen 44 percent in two months. According to Markit, a data provider, the cost of default protection on its debt has risen sharply to 495 basis points Friday, up 46bp from the previous session and the highest level in two and a half years. As a result, the cost of insuring $10m of Morgan Stanley bonds for five years will now work out to $495,000.

One hedge fund manager who has reduced the amount of cash it held in Morgan Stanley as a precautionary measure, said “We are watching it closely,” and added “We are trying not to have too much at any one place, but we can’t do business without them.”

There was no comment from Morgan Stanley.