Prudential's shares have fallen almost 20 per cent since it agreed a $35.5bn takeover of the Asian life business of AIG, the stricken US insurer, raising concerns about the UK company's ability to close the deal.

Hedge funds betting against the stock were blamed by some in the market for the drop in the shares, while others said investors were growing increasingly nervous about the stock and currency market risks over the next two months.

The deal to buy AIA, which was hammered out last week and announced on Monday, would more than double the Pru's size and transform it into a company dominated by its Asian businesses.

According to one banker familiar with the situation and a senior Pru executive, the company had fully hedged the currency risk attached to the deal by the time it announced the agreement, but the amount of stock the group will have to issue is hostage to its share price level.

Pru shares finished down 8 per cent at 487.5p yesterday – having been below 480p earlier – meaning they have lost almost one-fifth of their value since the start of the week.

Some in the market said the Pru may have left itself vulnerable to a takeover approach if its shares continued to fall and a rival took the opportunity to bid for it before the AIA deal made it an unassailable target.

Such a move would make little sense for either Pru shareholders or a bidder, said one person involved with the company, because the bid would have to be for more than the £6 that Pru stock traded at before the AIA deal was announced.