Mengniu Dairy (Hong Kong stock code 2319) is down 22.8% at HK$20.30, off an earlier low at HK$19.46, after the latest tainted milk incident, which is likely to affect consumers’ confidence in Mengniu, resulting in lower product sales. Even more damaging perhaps is the impact on Mengniu’s reputation, just as the company has been regaining consumer trust following the industry-wide melamine contamination scandal in 2008. In addition, “Mengniu’s valuation is expensive to begin with,” says Ben Kwong, COO at KGI Asia; at Friday’s close, the stock was trading at 18.3X consensus FY12 earnings according to Thomson Reuters. Trading volume in the shares in the first 10 minutes of trade is already HK$266.1 million, more than doubling HK$103.2 million all of Friday, suggesting a lot of shareholders are eager to unload the stock.