MORGAN Stanley is reported to be selling part of its stake in China International Capital Corp to private equity firms Kohlberg Kravis Roberts & Co and TPG Capital to pave the way for its new investment banking joint venture in China.

KKR and TPG have each agreed to buy around 11 percent of CICC from United States-based Morgan Stanley, which is disposing its 34.4 percent stake in CICC, Dow Jones cited an unnamed source as saying yesterday. The newspaper added that the deal, which is worth US$1 billion, is still awaiting Chinese regulatory approval.

CICC's existing shareholders will buy the remainder of the US bank's stake in the Chinese investment bank, the person was quoted by Dow Jones as saying.

Morgan Stanley has long sought to dispose its stake in CICC, which it helped to set up in 1995, so that it will be able to form a new joint venture with Shanghai-based China Fortune Securities for which a memorandum of understanding had been signed in 2007. Chinese law does not allow foreign companies to have two jointly-owned investment ventures at the same time.

On Monday, China Fortune said it planned to invest 680 million yuan (US$101 million) to set up an investment bank with Morgan Stanley, with the former owning two-thirds of the stake.