Huishan fallout spreads as Chinese bank tumbles 10% in Hong Kong

[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 Co.

Shares of Jiutai Bank, based in the north-eastern Chinese city of Changchun, tumbled 10 per cent in Hong Kong trading to HK$4.74 as of the city's midday break, its biggest drop since it listed 2 1/2 months ago.

A mysterious collapse in Huishan Dairy's shares on Friday that erased about US$4 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$372.230 million) of loans, Caixin reported Saturday. Champ Harvest Ltd, 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 Andrew Clarke, Hong Kong-based director of trading at Mirabaud.

"Are they more favourable than a normal commercial loan?"

Multiple phone calls to Jiutai Bank's headquarters weren't answered.

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