By staff reporter Wang Zhen

News about the widening scale of a contaminated dairy products scandal in China sent the Shanghai Composite Index skidding Tuesday to finish at 2201, down 1.56 percent from the previous trading day.

Bright Dairy (SSE: 600597) shares plunged to the daily trading limit 10 percent to close at 4.03 yuan. Investors have punished the company following the discovery of melamine, a chemical that can cause kidney stones, in its products.

The Shanghai-based company announced a plan to buy all its shares held by the French company Danone Asia Pte Ltd. The transaction would increase Bright’s holding to 35 percent of the total outstanding shares.

Another dairy company hit by the scandal, Yili (SSE: 600887), saw its shares plunge 9.97 percent Tuesday to nearly the 10 percent trading limit just minutes after the market opened, finishing at 9.93 yuan. The company was an official sponsor of the Beijing Olympics.

Bucking the trend was Sanyuan Dairy, whose share price soared for the third consecutive day, reaching the 10 percent trading limit in each session. Sanyuan is one of the few major producers whose name did not appear on a list of tainted milk products announced by the government’s Administration of Quality Supervision, Inspection and Quarantine.

However, share prices for the giant Mengniu Dairy (HKSE: 2319) plunged more than 60 percent to finish around HK$ 8. Mengniu is the only Chinese dairy stock traded in Hong Kong.

A nationwide investigation found the chemical in powdered milk killed four babies and seriously poisoned 104. Altogether, nearly 15,000 children have been hospitalized.

Authorities said milk products tainted with melamine was sold by 22 Chinese companies including the publicly listed Bright, Yili and Mengniu.

1 yuan = 14 U.S. cents