UPDATE 1-Singapore's DBS undecided on TMB share purchase

(Adds background, analyst comment, share price)

SINGAPORE, Nov 27 (Reuters) - DBS (DBSM.SI: Quote, Profile, Research, Stock Buzz), Southeast Asia's biggest bank by assets, said on Tuesday it has not decided whether to buy shares in a rights issue by Thailand's TMB Bank, but would back the $1 billion recapitalisation in principle.

On Nov 7, TMB rejected a $618 million bid by DBS and its partner Deutsche Bank (DBKGn.DE: Quote, Profile, Research, Stock Buzz) to raise its TMB TMB.BK stake in favour of a $675 million offer from Dutch financial group ING (ING.AS: Quote, Profile, Research, Stock Buzz).

"We are currently exploring various options and have not made any decision on whether DBS will subscribe to the rights yet," said Karen Ngui, a spokeswoman for the Singapore bank.

DBS wanted to raise its stake in TMB as part of its strategy to expand its presence in emerging markets in Asia and to lessen its dependence Singapore and Hong Kong markets where it generates 90 percent of its profit.

The bank has made several unsuccessful attempts to buy banks in China and South Korea under outgoing Chief Executive Jackson Tai.

But TMB, of which DBS owns 16 percent, has been a painful investment for the Singapore lender since it wrote down the value of its stake by S$38 million ($26 million) in the third quarter, the second straight quarter of write-downs.

Analysts said that DBS should only put additional capital in TMB if the loss-making bank is headed for big changes under ING.

"If the new shareholding represents a change in the right direction, only then DBS should allocate capital," said David Lum, an analyst at Daiwa Institute of Research.

DBS stock was down 2.1 percent at S$19 by 0136 GMT, in line with the broader market .STI. (Reporting by Saeed Azhar, editing by Jan Dahinten)