Dec. 19 (Bloomberg) -- Wall Street is turning to Asian and Middle Eastern governments for $25 billion to prop up balance sheets battered by writedowns from the collapse of the U.S. subprime market.

State-controlled China Investment Corp. is buying an almost 10 percent stake in Morgan Stanley for $5 billion after the second-biggest U.S. securities firm reported a loss today of $9.4 billion from mortgage-related holdings. Citigroup Inc., Zurich- based UBS AG and Bear Stearns Cos. also received sovereign money after bad investments depressed profits.

``When the latest U.S. bubble bursts, who do you turn to to bail out your financial system?'' said Winston Wenyan Ma, author of ``Investing in China: New Opportunities in a Transforming Stock Market,'' published last year by Risk Books. ``You have to look to external sources because you've run out of liquidity at home.''

UBS, the biggest Swiss bank and the world's No. 1 underwriter of global equity share sales, replenished its capital last week with 13 billion Swiss francs ($11.5 billion) from the Government of Singapore Investment Corp. and an unidentified Middle Eastern investor by selling them bonds that will convert into shares. New York-based Citigroup, the biggest U.S. bank by assets, said Nov. 27 that Abu Dhabi invested $7.5 billion.

`They See Value'

Bear Stearns, the fifth-largest securities firm by market value, moved to shore up investor support in October by selling a stake to China's government-controlled Citic Securities Co. Bear Stearns has declined 26 percent since then in New York Stock Exchange Composite trading.

``They're buying our financial markets infrastructure,'' said Frederick Lane, chairman and chief executive officer of Boston-based investment bank Lane Berry & Co. ``They have a long- term perspective and they see value.''

Together, Morgan Stanley, Citigroup, UBS and Bear Stearns have disclosed about $39 billion of mortgage-related writedowns since June. Shares of the four companies have dropped more than 25 percent this year.

Blackstone Group LP, manager of the world's biggest leveraged buyout fund, has declined 24 percent since its initial public offering in June after China Investment agreed to buy a $3 billion stake in the New York-based firm.

``When China buys something, that's when you short it,'' said William Gamble, founder of Emerging Market Strategies, an industry consulting firm in East Providence, Rhode Island.

U.S. Ports

The reaction to the investments in Morgan Stanley and the other financial institutions contrasts, at least so far, with what happened after Dubai-based DP World Ltd. proposed to acquire Peninsular & Oriental Steam Navigation Co. last year for $6.8 billion. The DP World plan prompted the U.S. Congress to examine the deal because of security concerns at six ports.

DP World eventually sold the six terminal operations because of the political pressure. Since then, foreign investors have learned to make clear that they aren't interested in a management role, said Robert Webb, a finance professor at the University of Virginia in Charlottesville.

``You have to welcome it, when we have financial institutions in trouble here, that they can get help quickly and on good terms,'' said Felix Rohatyn, the former Lazard Freres and Co. partner and U.S. ambassador to France, who's now a senior adviser to Lehman Brothers Holdings Inc.

Capitol Hill Reaction

New York Senator Charles Schumer, one of the lawmakers who opposed the Dubai ports transaction, endorsed Morgan Stanley's deal with China's sovereign wealth fund.

``This agreement will provide capital for Morgan Stanley and thus strengthen one of New York's premier companies,'' Schumer said in a statement today. ``This will help New York preserve jobs and keep its position as the globe's financial center.''

Schumer, a Democrat, also issued a statement last month in support of Abu Dhabi's investment in Citigroup. The Abu Dhabi investors said they weren't interested in a governance role at Citigroup.

``They deliberately chose to show they were just investing their funds and not seeking control,'' Webb said in an interview.

Morgan Stanley said China Investment, the nation's sovereign wealth fund, will not get a seat on its board of directors or play a role in management.

Senate Banking Committee Chairman Christopher Dodd, a Democrat from Connecticut, today said he was reserving judgment on China's investment in Morgan Stanley pending further study. ``I need to know more about the specifics,'' he said.

SEC Concerns

Dodd also said he intends to determine whether the transaction must undergo review by the U.S. Committee on Foreign Investment. CFIUS, as the panel's known, examines whether acquisitions by overseas buyers compromise national security.

U.S. Securities and Exchange Commission Chairman Christopher Cox warned earlier this month that the growth of state-run investment funds may trigger an increase in political corruption because governments might potentially abuse the funds' leverage over markets and companies.

``When individuals with government power also possess enormous commercial power and exercise control over large amounts of investable assets, the risk of misuse'' increases ``markedly,'' Cox said during a Dec. 5 speech in Washington.

To contact the reporter on this story: Matthew Leising in New York at mleising@bloomberg.net; Zachary Mider in New York at zmider1@bloomberg.net

Last Updated: December 19, 2007 16:46 EST