China has rejected Coca-Cola's planned $2.4 billion acquisition of top juice maker Huiyuan Juice <1886.HK>, saying the deal would have been bad for competition.

This just shows that China is still not open to allowing the takeover of a national brand, said Jeffery Lau, an analyst with Polaris Capital.

But this is not exactly a huge surprise to the market, protectionism has been on the rise everywhere this year. This also explains why the stock has been trading at a nearly 20 percent discount to the takeover price, he said.

A Coca-Cola spokesman in Hong Kong did not have an immediate comment, and an official with Huiyuan could not immediately be reached for comment.

China's Ministry of Commerce said the deal would have been bad for competition and that Coca-Cola's changes to the deal were insufficient to allay its concerns.

It's a surprise, said Lawrence Chor, analyst at Taifook Securities in Hong Kong.

I could foresee this deal yielding side effects to other companies investing in China, also to those Chinese companies trying to expose themselves in the overseas market, he said.

DOUBTS FROM THE START

Shares in Huiyuan were suspended from trading earlier on Wednesday after slumping nearly 23 percent following a Financial Times report that said Coca-Cola might drop its bid for Huiyuan after Chinese antitrust regulators signaled it would have had to relinquish the 'China Huiyuan Juice' brand after the acquisition.

China's rejection of the deal comes as Australia's Foreign Investment Review Board is considering three big investments by Chinese state-run companies in its mining sector.

Last year, after three years of talks, U.S. private equity firm Carlyle Group walked away from a plan to buy Xugong, China's biggest construction equipment maker, after running into bureaucratic obstacles.

Coca-Cola spokesman Kenth Kaerhoeg said in an e-mailed statement to Reuters earlier on Wednesday that it would be inappropriate to comment on the approval process.

We are focused on the regulatory approval process. We are in very regular contact with the MOC (Ministry of Commerce), and we try to be as helpful as possible in answering questions and providing supplementary information, he said.

Huiyuan shares have traded below Coca-Cola's offer price, indicating investors doubted the deal would go through. Shares in Huiyuan traded at HK$4.10 on Aug 29. The stock nearly tripled to a high of HK$11.28 right after the deal was announced in early September.

(US$1=HK$7.8)

(Reporting by Michael Wei, Donny Kwok, Fion Li and Parvathy Ullatil; Writing by Tony Munroe; Editing by Ken Wills and Muralikumar Anantharaman)

China