PARIS, FRANCE - US investment giant Morgan Stanley has frozen talks on a merger with Wachovia bank but is pressing on with talks for CIC of China to end up with a big stake in it, the FT online reported on Monday.

Morgan Stanley had frozen its talks with Wachovia Corporation after being authorised to switch its status from investment bank to a holding company, the Financial Times online reported, citing sources close to the matter.

Morgan Stanley was widely reported last week to be looking for help through a tie-up with another bank, but at the weekend the US Federal Reserve bank authorised it and Goldman Sachs to change status.

The newspaper quoted sources close to the merger talks as saying this change relieved the pressure for a tie-up.

The change means that the two companies, the last two independent investment banks on Wall Street after the collapse of Lehman Brothers a week ago and the purchase of Merrill Lynch by Bank of America, can have access to certain Federal Reserve support in exchange for respecting tighter banking rules.

Morgan Stanley entered talks with Wachovia Corporation after its own shares came under attack during the wild turmoil on financial markets last week.

The sources said that the talks had now been frozen for an indefinite period.

But Morgan Stanley continued to pursue talks to sell a big slice of its capital to Chinese sovereign wealth fund China Investment Corporation (CIC), the report said.

Media reports have suggested that CIC could end up with 49 percent of Morgan Stanley.