China Modern Dairy was one of the worst-performing stocks in the Hong Kong market yesterday as its trading debut was spoiled by concerns about mainland food safety and overall market malaise.
The raw milk producer tumbled as much as 16.6 per cent in the afternoon before finishing down 13.2 per cent at HK$2.51. More than HK$750 million worth of its shares changed hands on the day.
China Modern Dairy raised about HK$2.2 billion by selling 800 million new shares at HK$2.89 apiece. The offering price was at the low-end of an indicated range.
'People usually avoid this sector,' said Patrick Yiu Ho-yin, managing director at CASH Asset Management. 'Investors are worried that there may be some negative impact from so many of the issues coming out from the dairy industry.'
Other mainland-based dairy companies have not fared well either with their new listings recently. Yashili International Holdings, a milk formula maker, listed on November 1 and is down 22.4 per cent from its offering price. Global Dairy Holdings came to market at the end of last month and is down 33.7 per cent from its IPO price.
The mainland dairy market came under intense scrutiny in 2008 when half a dozen children died and a reported 300,000 became ill after consuming milk and formula later found to be contaminated with an added chemical called melamine. Dairy product makers have since taken steps to improve oversight of the milk they are using by consolidating procurement around large-scale farms.
