Peugeot shares sinks 10 percent on capital hike worries

PARIS (Reuters) - Shares in PSA Peugeot Citroen <PEUP.PA> tumbled 10 percent on Thursday, representing a 430 million euros ($592 million) wipeout in market capitalization, after the car maker unveiled a big writedown and confirmed it is mulling a capital increase.

A source told Reuters late on Wednesday that the company's board had approved a plan for an alliance with Dongfeng Motor <0489.HK> in which the Chinese carmaker and the French state would buy large minority stakes at a 40 percent discount to Peugeot's current share price.

"The discount that is being rumoured seems massive, which raises a lot of questions," a Paris-based trader said.

(Reporting by Blaise Robinson; Editing by Natalie Huet)