Shares of Dah Sing Banking Group dropped as much as 12.88 per cent yesterday after the bank announced a share placement to raise HK$302.4 million. The stock closed at HK$5.81, down 11.97 per cent, while parent Dah Sing Financial Holdings fell 0.48 per cent to HK$20.90. Dah Sing Banking financial director Gary Wang said the bank was under no pressure to raise capital as its capital adequacy ratio exceeded 15 per cent and the business was stable. He said the placement was aimed at taking the opportunity to strengthen its capital base since it would have a limited effect in diluting existing shareholders. After the deal, Dah Sing Banking's capital adequacy ratio would increase by 0.4 percentage point to 15.8 per cent, while Dah Sing Financial's stake will be diluted to 70.86 per cent from 74.96 per cent. Daiwa Institute of Research estimated the new share issue would have a dilution effect of 4.5 per cent for this year and 4.2 per cent for next year, and the forecast book value per share would fall slightly to HK$8.83 for this year from HK$9, and HK$9.48 for next year from HK$9.68. Daiwa also expected the placement might trigger speculation that Dah Sing Banking was a takeover target, since it showed there was interest in the market in its shares, making it a good target. 'We do not exclude the possibility that the Wong family [the major shareholder] might sell Dah Sing Banking at a reasonable price,' Daiwa Institute of Research analyst Steven Chan said. Meanwhile, Fox-Pitt, Kelton said the new share sale was a positive step in that it raised the free-float portion of the bank's share capital and replenished its capital base. Fox-Pitt, Kelton lifted its fair value estimate on the bank by 12 per cent to HK$8.02 as a capital shortfall adjustment is removed. 'However, we remain concerned about the rapid pick-up in impaired loans seen in the second half of 2008 with little near-term relief in sight,' it said.