Citic Securities, China's biggest brokerage, is pushing to renegotiate an agreement made in October to buy a stake in Bear Stearns after the Wall Street firm's shares plunged by more than a third.

Citic, which originally agreed to pay $1 billion for a 6 per cent stake in Bear Stearns, is now demanding about 8 per cent of the American bank on the basis that the payment represents a larger share of the group because of the stock's 35 per cent decline since the deal was announced.

Kong Dan, chairman of the state-owned China International Trust and Investment Group, the parent of Citic, said that the “share prices have changed, so the stakes should be based on market prices”. He predicted that a revised agreement would not take long. “We're keen to expand overseas and Bear really wants to tap China's growth and development,” he said.

A Bear Stearns spokeswoman said that “the strategic rationale of the deal hasn't changed”.

As part of the original cross-investment deal, Bear Stearns agreed to assume $1 billion of Citic's debts in return for a 2 per cent stake in the Chinese broker. Bear Stearns could receive as much as 4 per cent under a revised agreement, as Citic's share- price decline since October has been even greater, with the stock down 47 per cent.

The banks' recent declines in share price have left their investors sitting on billions of dollars of collective losses, with Joe Lewis, the reclusive billionaire owner of Tottenham Hotspur FC, among the biggest losers.Mr Lewis, who snapped up about $860 million of Bear Stearns shares in September, and a further $120 million in the following two months, is sitting on a paper loss of more than $200 million. Like other Wall Street banks, Bear Stearns has been badly hit by America's housing crisis, which has forced it into billions of dollars of writedowns on bonds backed by high-risk “sub-prime” mortgages and prompted the closure of two hedge funds that it ran.

The deal with Citic is intended to provide Bear Stearns with a source of much-needed capital and to give it more exposure to the expanding Chinese market, where the bank lags many of its rivals. As part of the original agreement, the two groups will set up a joint venture in Hong Kong to service the Asian market outside China.

So-called sovereign wealth funds such as Citic have invested more than $105 billion in banks such as Citigroup and Merrill Lynch in the past eight months as they seek to repair balance sheets that have been decimated by $181 billion of sub-prime losses.

Many of these funds are sitting on short-term losses as the share price of the banks have continued to decline following their cash injections.

Jim Rogers, who co-founded the Quantum hedge fund with George Soros, said yesterday that sovereign wealth fund losses would continue to mount because American bank stocks had further to fall.

Bear Stearns shares added 43 cents to stand at $77.60 in midday trading.

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