Morgan Stanley has failed in its attempt to form a landmark securities joint venture in Vietnam after the government bowed to pressure from rival banks angered by the proposed deal.

The US investment bank announced a tie-up last March with Vietnam's State Capital Investment Corporation, which in effect owns most of the country's companies, to provide domestic investment banking services. Both sides had expected approval in time for it to start operating by the end of last year but the government has rejected the plan to ally SCIC with just one overseas investment bank.