Morgan Stanley stock surged yesterday, almost doubling in price after Japan's Mitsubishi UFJ Financial Group completed its $9 billion investment in the bank yesterday, media reports said.

US government support helped Morgan to secure a deal that many investors had feared could fall apart. Morgan Stanley shares soared as much as 97 per cent yesterday after Japan's largest bank bought a 21 per cent stake one day earlier than expected. Last week, the New York bank's stock plunged by more than half amid fears that Morgan, forced to wait five days before completing the deal, might not survive the crisis.

Despite the market euphoria about the deal, Fitch Ratings yesterday cut its long-term issuer default rating on Morgan Stanley by two notches to "A," or sixth-highest investment grade. It also downgraded the long-term senior debt to "A" and the subordinated debt to "A-minus," or seventh-highest investment grade.

Fitch said it expects the current stresses on the bank's core business to continue for some time.

Amending the terms of a September 29 agreement, Mitsubishi bought only preferred stock in Morgan Stanley, in contrast with the initial deal under which it had agreed to buy $3 billion of common stock at $31.25 a share -- Morgan's book value.