(Yicai) Nov. 20 -- Shares of Zhengzhou Coal Mining Machinery Group fell after the Chinese maker of mining equipment said it had invested as much as CNY300 million (USD41.8 million) in products linked with Huisheng Private Equity Securities Fund Management, which is accused of fraud.

Zhengzhou Coal Mining [HKG: 0564] finished 4.1 percent down at HKD7.53 (97 US cents) a share in Hong Kong today, while its Shanghai-listed stock [SHA: 601717] lost 3.2 percent to end at CNY11.65 (USD1.63).

Zhengzhou Coal Mining bought into three trust products of New Momentum Asset Management that are at risk and may not be repaid in full, the Henan province-based company said yesterday. The firm invested CNY300 million (USD41.8 million) in total and less than 10 percent has been recouped so far, it added.

New Momentum is one of the largest managers of PE fund of funds in China. On Nov. 14, the firm said that it has been having trouble redeeming assets that were allocated to Huisheng PE due to the latter's defaults. 

To minimize the potential losses, Zhengzhou Coal Mining has assigned a dedicated person to keep abreast of the matter and report to the public security authorities, it added.

Besides New Momentum, several other investment firms, including Yunnan International Trust, have been affected by the defaults and the largest investment that may not be recovered is worth around CNY3 billion (USD418.2 million), an insider said to Yicai earlier.

People familiar with the matter said that Mao Wei, the actual controller of Huisheng PE, was taken away by police earlier this month and Yang Zebin, fund manager at an affiliate, was detained more than a week ago. Huisheng PE's Hangzhou office was reported to be empty.

Zhengzhou Coal Mining’s net profit rose 26 percent to CNY2.5 billion in the first three quarters of this year on a 15 percent gain in revenue to CNY27.3 billion (USD3.8 billion), according to the firm’s latest financial report.

Editor: Emmi Laine