Morgan Stanley has been dragged into a risky Chinese court battle over a hedging contract with a local company in the latest stand-off between foreign investment banks and mainland enterprises over loss-making derivatives deals.
The case comes at a sensitive time for global banks, with Beijing seeking to clamp down on the over-the-counter derivatives markets after a raft of state-owned companies made disastrous bets on currency and commodity movements.
Although the sums involved are small – relating to renminbi-dollar hedges worth just tens of millions of dollars – a legal battle in China could be prolonged and subject Morgan Stanley to financial and reputational risks, lawyers said.
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