China Huishan Dairy Fallout Spreads as Chinese Lender Slumps

HONG KONG - Jilin Jiutai Rural Commercial Bank Corp shares slumped by a record amid concern over its exposure to the embattled dairy product manufacturer China Huishan Dairy Holdings on Monday (27 March).
calendar icon 27 March 2017
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The Straits Times reports that shares of Jiutai Bank, based in the north-eastern Chinese city of Changchun, tumbled 11 per cent in Hong Kong trading to HK$4.72 as of 1:58pm local time, its biggest drop since it listed two and a half months ago.

A mysterious collapse in Huishan Dairy's shares on Friday that erased about US$4 billion (S$5.59 billion) of its market value and prompted a trading halt has hurt other firms linked to the dairy company.

Jiutai Bank is Huishan Dairy's second-biggest creditor with 1.83 billion yuan (S$371.2 million) of loans, Caixin reported on Saturday. Champ Harvest, Huishan Dairy's largest shareholder, owns 17.9 per cent of the lender's Hong Kong-listed shares, data from the city's exchange show. Champ Harvest is controlled by Huishan Dairy's Chairman Yang Kai.

Investors are concerned about "how much exposure does Jiutai Bank have, and as Champ is a 15 per cent-plus holder of Jiutai Bank, what are the terms of the exposure", said Mr Andrew Clarke, Hong Kong-based director of trading at Mirabaud. "Are they more favorable than a normal commercial loan?"

Jiutai Bank considers the drop in its share price as a "normal fluctuation", an external spokesman for the lender said by phone from Hong Kong. "The share price is affected by various factors," she said, adding that the bank had no further comment.

The trading volume in the lender's stock by early Monday afternoon was almost eight times the daily average since Jiutai Bank listed on 12 January, data compiled by Bloomberg show.

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