Chartered, hammered by the global slowdown, closed at 12.5 Singapore cents (eight US cents), down from Monday's close at 20.5 cents. It briefly hit an intra-day low of 11.5 cents.

The company said Monday it will issue 27 new rights shares for every 10 ordinary shares. It said it planned to reduce the number of outstanding shares by consolidating 10 shares into one after the rights issue is completed.

It said the cash raised will strengthen its capital position, fund future expenditures and service debts, but worries about the shares being diluted prompted a heavy sell-off, dealers said.

"For $300 million, the dilution will be crazy," a local analyst told Dow Jones Newswires, adding that most of the people trading Chartered shares are speculators.

Some analysts said the fund-raising was crucial for the company, even if it comes at the expense of shareholders.

"This fund-raising exercise, in our view, is completely credible and expected, given the limited financing options it has and the deepening losses it is expected to sustain," said OCBC Investment Research's Kevin Tan.

Brokerage house DMG cut its call on Chartered to "sell" from "hold" on the bleak outlook for the semiconductor sector this year.

"We believe that current shareholders should offload their shares rather than subscribe to the rights issue," it said.

Industry trackers Gartner and the International Data Corporation have slashed projections of global spending on information technology and said computer chip makers could be hit with an unprecedented plunge in revenue.

Brokerage CLSA said Chartered minority shareholders "have two options -- be diluted or give Chartered some money to burn."

Singapore sovereign wealth fund Temasek Holdings, which owns 59 percent of Chartered, has pledged to subscribe to the rights issue in full.

Chartered, which is listed in Singapore and on the Nasdaq in New York, reported a fourth quarter net loss of  US$114 million after the global recession weakened demand for semiconductors.

It also said it would cut 600 jobs, bringing the total workforce reduction since the third quarter to about 1300 positions, or approximately 18 percent of the total.

Chartered makes custom-built microchips for set-top boxes and video games, as well as MP3 and DVD players. It listed US technology firms Broadcom and Qualcomm as among its largest customers last year.

- Dow Jones Newswires contributed to this story

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