Mumbai: Hong Kong and Shanghai Banking Corporation (HSBC), the Asia-focused British bank, has terminated its proposed acquisition of 51 per cent stake in Korea Exchange Bank amidst the global financial market crisis.

HSBC, which had struck $6.3 billion (£3.5 billion) deal with private equity firm  Lone Star last September, ended the deal last night after its attempts to renegotiate a lower price for the 51 per cent stake failed.

''Taking into account all relevant factors including current asset values in world financial markets, HSBC Asia exercised its right to terminate the acquisition agreement with immediate effect,'' HSBC Asia chief executive and HSBC executive director Sandy Flockhart said in a release.

While HSBC said discussions with Lone Star had not led to an ''acceptable'' agreement, it largely blamed the current financial turmoil for its decision.

''In the light of developments around the world, not least changes in asset values in world markets, we do not believe that it would be in the best interests of shareholders to continue to pursue this acquisition on the terms negotiated last year,'' the statement added.

The acquisition of Korea Exchange Bank was expected to give HSBC a significant presence in South Korea, the third largest economy in Asia, and reinforce its position as Asia's number one international bank.

Lone Star, which had problem getting Korean government permission for selling its stake to HSBC, may now have to search for a new buyer for its stake in KEB, which it bought in 2003 when the bank was almost bankrupt.

''We will work with our major shareholder to find a new shareholder that shares our goals for the future of KEB,'' Korea Exchange Bank CEO Richard Wacker said in a broadcast to employees.

With overseas bidders unlikely to come, Korea Exchange Bank may now look for Korean suitors interested in its extensive overseas network and foreign exchange expertise. But, a lenders union that does not favour a local suitor, may spoil the chances of a domestic take-over.