UPDATE 1-Daiwa Sec shares dive 12 pct after share sale news

*Daiwa shares plunge 12 percent after share sale announcement

*Nikko Citigroup analyst: size of capital boost a surprise

*Nomura falls 0.8 percent while Nikkei up 0.4 percent

TOKYO, June 29 (Reuters) - Shares in Daiwa Securities Group (8601.T) tumbled 12 percent after Japan's second-largest brokerage announced it would raise $2.5 billion through its first equity offering in 20 years to expand its operations.

Daiwa plans to issue up to 345 million new shares and sell roughly 58 million of its own shares in Japan and overseas, with the new issue increasing its outstanding stock by about a quarter. [ID:nT322520]

"We believe the offering will be negative for the share price in the near term as we had not thought this much additional capital would be needed," Nikko Citigroup analyst Makoto Kasai said in a note to clients.

Daiwa's shares fell to 586 yen, its lowest level in about a month. Shares in Nomura Holdings (8604.T) fell 0.8 percent while Japan's benchmark Nikkei 225 rose 0.4 percent.

Daiwa said it would use the funds to expand overseas and bolster its domestic retail operations, a move that comes as the domestic economy shows signs of recovering from its worst recession since World War Two.

Last month Daiwa Securities SMBC Co, Daiwa's investment banking arm, agreed to buy the corporate finance unit of Britain's Close Brothers Group (CBRO.L) to accelerate its overseas expansion. [ID:nT137393]

Earlier this month Daiwa also said it would spend about $140 million to take a stake in a real estate investment trust (REIT) and buy the trust's asset manager from DaVinci Holdings (4314.OJ) to boost its property business. [ID:nT58298] (Reporting by Junko Fujita and Elaine Lies; Editing by Edwina Gibbs)