SHENZHEN Development Bank said yesterday it had terminated a planned private placement to sell 120 million shares to Shanghai Baosteel Group in light of a flagging stock market.

The Shenzhen-based bank will issue bonds worth a total of 28 billion yuan (US$4.1 billion) instead to supplement capital, it announced yesterday in a statement to the Shenzhen Stock Exchange.

"The preconditions for the bank to sell a stake to Baosteel have not been satisfied," the bank said. "After friendly talks with Baosteel, we agree to terminate the placement."

Baosteel yesterday declined to comment on the issue.

The bank on November 30 signed a contract with Baosteel, China's biggest steel maker, which agreed to buy 120 million shares of the lender at 35.15 yuan each.

The domestic stock market started to nosedive late last year and has lost nearly two-thirds of its value so far from its peak in October.

Shares of the bank ended 2.09 percent lower at 14.99 yuan yesterday while the key Shenzhen Component Index gained 2.47 percent to 7,559.27.

The bank plans to issue 10 billion yuan subordinated bonds, 10 billion yuan financial bonds and 8 billion yuan hybrid bonds either on domestic or overseas markets over the next three years, pending shareholders' approval, the lender said yesterday.

The bank also plans to auction non-performing assets worth 2.68 billion yuan, it said.

The bank, about 18 percent held by US private equity firm Newbridge Capital, said it would offer interim returns to investors with a package of three-for-10 bonus shares and a 0.0335 yuan per share pre-tax cash dividend based on its first-half earnings.