MAJOR PAPERS:

• In a step toward expanding its reach into China, UCBH Holdings Inc (NASDAQ: UCBH) has acquired a full stake in Shanghai-based Business Development Bank in a deal valued at $205M, the Wall Street Journal reported.

OTHER PAPERS:

• After creating an agreement with the International Herald Tribune, Reuters Group Plc (NASDAQ: RTRSY) is reportedly in discussion for a similar agreement with The New York Times Company (NYSE: NYT), the UK Times reported.

WEBSITES:

• In an interview with Bloomberg, E.I du Pont de Nemours and Company's (NYSE: DD) CEO Charles Holiday said he believes the U.S. economy will be able to avoid a recession in 2008.
• According to "people familiar with the plan," Amgen Inc. (NASDAQ: AMGN) may sell its Japanese unit in an effort to help cut global costs due to a slump in sales and lower earnings forecast, Bloomberg reported.

It may not seem like much that a Chinese bank not well-known in America is buying into a medium-sized US bank. But it is of interest because it has never happened before and perhaps is the beginning of a wave

According to the FT, "China Minsheng Bank is set to become the first mainland institution to invest in a US bank after striking a deal to acquire 9.9 per cent of San Francisco-based UCBH Holdings (NASDAQ:UCBH) for over $200 million." The paper speculates that there will be many more of these deals to come. The Chinese banks are flush with cash, and the big US market is attractive. The paper adds that Beijing-based Minsheng has never been state-owned. It was founded by a group of investors in 1996, and was the first private Chinese bank to list on the Shanghai stock exchange.

The deal would appear to be mundane because of its size, but it opens the question of whether Chinese banking companies can buy into any US bank. If so, how much can they own? Is a bank strategic to US interests the way that a defense contractor would be? Should the US government have any role in approving banking deals?

The answers goes to the heart of whether US markets are truly free markets, or can the US government determine that on a case-by-case basis.

Probably no one will care about the UCBH deal, but what if a Chinese bank wants 5% of Citigroup (NYSE:C).

Saudi interests already own a piece of Citi, so why shouldn't the Chinese?

Douglas A. McIntyre is a partner at 24/7 Wall St.

MOST NOTEWORTHY: The environmental services sector, the machinery and capital goods sector and several bank holding companies were today's noteworthy initiations:

• Credit Suisse initiated shares of Allied Waste Industries Inc (NYSE: AW), Republic Services Inc (NYSE: RSG) and Waste Management Inc (NYSE: WMI) with Outperform ratings and a $16 target, $35 target and $45 target, respectively.
• Bernstein initiated the machinery and capital goods sector, initiating shares of Caterpillar Inc (NYSE: CAT) and Illinois Tool Works Inc (NYSE: ITW) with Outperform ratings and a $100 target and $68 target, respectively and Deere & Company (NYSE: DE), Eaton Corporation (NYSE: ETN), Ingersoll-Rand Company Ltd (NYSE: IR) and Parker-Hannifin Corporation (NYSE: PH) with Market Perform ratings.
• Sandler initiated shares of Preferred Bank Los Angeles CA (NASDAQ: PFBC) and UCBH Holdings, Inc (NASDAQ: UCBH) with Buy ratings and shares of Cathay General Bancorp (NASDAQ: CATY) and East West Bancorp, Inc (NASDAQ: EWBC) with Hold ratings.

OTHER INITIATIONS:

• Golfsmith International Holdings Inc (NASDAQ: GOLF) was initiated at Wedbush with a Buy rating and $8.75 target, as the firm believes the company is an attractive growth story and buyout candidate.
• Pharmasset Inc (NASDAQ: VRUS) was initiated with a Buy rating and $12 target at Banc of America, as the firm believes Clevudine has the potential to be best in class for the treatment of the hepatitis B virus.
• Ciena Corporation (NASDAQ: CIEN) was initiated with an Outperform rating and $40 target at Piper Jaffray.