Key Takeaways
- Morgan Stanley faces congressional scrutiny over its role in a $3.7 billion Hong Kong IPO for Zijin Gold International.
- US Representative John Moolenaar questions the bank’s due diligence regarding the parent company’s alleged forced labor links.
- The House China committee is expanding its investigation into Wall Street’s involvement with Chinese firms on US blacklists.
Morgan Stanley is under investigation by the US House China committee for its due diligence practices while underwriting Zijin Gold International’s $3.7 billion IPO. Republican committee head John Moolenaar has formally questioned whether the bank adequately assessed risks associated with the gold miner’s parent company, which is on a US entity list for alleged forced labor violations.
Congressional Scrutiny Intensifies
In a November 13 letter to CEO Ted Pick, Representative Moolenaar demanded documents and communications related to the September offering. The IPO was the world’s largest gold mining listing since May, raising concerns about its structure potentially helping blacklisted parent Zijin Mining Group consolidate overseas assets while maintaining control.
“Morgan Stanley’s participation raises serious potential concerns about the adequacy of its due diligence practices in connection with a company that is included on a U.S. government entity list, is associated with human rights abuses, and maintains deep ties to the Chinese Communist Party,” Moolenaar wrote.
The bank has not immediately responded to requests for comment.
IPO Performance and Broader Probe
Morgan Stanley and Citic Securities Co. led Zijin Gold’s Hong Kong listing, which became the city’s second-largest this year after CATL’s $5.3 billion offering. The shares surged 68% on their debut and have since doubled in value.
This inquiry forms part of the House Select Committee on China’s broader review of Wall Street banks’ involvement with Chinese companies linked to military interests or labor abuses. Moolenaar stated that Morgan Stanley’s underwriting “showcases the very type of commercial activity the US government seeks to prevent.”
The committee had previously subpoenaed and Bank of America in July regarding their roles in CATL’s Hong Kong listing, indicating an escalating scrutiny of financial institutions’ Chinese partnerships.
