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Tougher delisting rules to clean up stock market

2018-03-13 3 ℃

CHINA’S share regulator and stock exchanges have released draft rules that will force companies to exit the equity market for serious law violations.

If companies are found guilty of fraudulent initial public offerings, making false financial disclosures or violating the law, they will be thrown out of the market, according to draft rules released by the Shanghai and Shenzhen stock exchanges.

The move came amid tougher market oversight and more severe punishment for illegal trading in recent years.

China had more than 3,500 listed firms, with a total value of nearly 58 trillion yuan (US$9.16 trillion), as of the end of last year.

While rapidly growing in size, the A-share market is struggling with problems such as inadequate implementation of delisting policies, which keeps dysfunctional companies in the market and undermines market confidence.

Since the first delisting in 2001, China’s A-share market has only seen 57 firms exit the exchange, according to Wind, an information service provider.

In rules published earlier this month, the China Securities Regulatory Commission said the country would enhance efforts to delist “zombie companies” and those with long-term losses and severely poor financial status.

The move will be a key step to foster an orderly market and improve investor protection, said Jiang Mingde, a consultant with Yixinweiye Fund.

The CSRC has also tightened approval procedures for IPOs as it rejected or suspended over half of IPO applications.