Morgan Stanley sets prices on China's investment

NEW YORK, Dec 23 (Reuters) - Morgan Stanley (MS.N) has set the range of prices at which China's $5 billion of securities can be converted into the bank's stock in 2010, as part of the country's investment in a 9.9 percent stake in the second largest U.S. investment bank.

Under terms disclosed on Friday, the Chinese fund will pay between $48.07 and $57.684 for Morgan Stanley shares.

China's foreign exchange fund last week agreed to buy the stake after Morgan Stanley, second only to Goldman Sachs in the U.S. by market capitalization, recorded $9.4 billion of losses in subprime mortgages and other assets.

China essentially bought securities that convert into shares of Morgan Stanley in August 2010 as part of that investment.

If Morgan Stanley's shares are trading below $48.07, the $5 billion face value of China's investment will be used to buy Morgan Stanley shares at $48.07.

If Morgan Stanley's shares are trading between $48.07 and $57.684, China's $5 billion will buy the shares at their market price.

If the investment bank's shares are over $57.684, China's $5 billion will buy Morgan Stanley shares at $57.684.

Morgan Stanley shares closed at $54.37 on Friday on the New York Stock Exchange. On Tuesday, the day before the investment bank announced results, its shares closed at $48.07. (Reporting by Dan Wilchins; Editing by Derek Caney)