Delisting system a must: exchange official

PUBLISHED : Tuesday, 07 December, 2010, 12:00am
UPDATED : Tuesday, 07 December, 2010, 12:00am

The mainland should speed up the introduction of a multilayered delisting system to boost development of the country's fast-growing stock market, a senior official with the Shanghai exchange said.

The regulator needs to focus on creating the delisting system to ensure the overall quality of mainland-listed companies, Xu Ming, deputy general manager of the Shanghai Stock Exchange, was quoted by China Securities Journal as saying.

His remarks came amid calls to expel underachieving companies from the nation's Nasdaq-style second-board market in Shenzhen.

'It is a must to focus on the delisting mechanism,' he said.

'We should have different standards for companies to be delisted from different boards, including the main board, the SME board and the start-up board.'

China does not have a real delisting system for its stock market that was established in 1990. In the past two decades, only a few habitual loss-makers have been thrown out of the Shanghai and Shenzhen exchanges.

Companies reporting losses for three consecutive years are now demoted to the so-called Securities Trading Automated Quotations network, an over-the-counter market. Listed firms that post two years of losses in a row are normally bailed out through so-called asset restructuring - under which parent companies inject profitable assets and take the non-performing ones to help them maintain the listing status.

However, the creation of the start-up board, ChiNext, has spurred the regulator to step up efforts to develop a real delisting system.

One year after the technology-heavy second board was set up, one-tenth of the listed firms showed sharp declines in interim earnings, though the stocks had been driven sky-high by investors who were convinced of a huge profit jump in those small companies when the market launched at the end of October last year.

'The earlier those underachievers are expelled, the better for the future growth of the market,' said Citic Securities analyst Sun Chao. 'A delisting mechanism also helps investors better understand the risks of the growth market.'

The regulator set a lower listing threshold for small companies seeking to list on ChiNext. Unlike state-owned firms traded on the main board, privately owned smaller firms are not able to turn around via asset restructuring since their founding shareholders are mostly individuals.