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SCMP Reporter

Loss-making washing-machine maker Shanghai Narcissus Electric Appliance is set to become the first mainland stock to be delisted in the 11-year history of the country's securities markets.

A Shanghai Stock Exchange hotline, set up after the stock exchange last week rejected the company's application for more time to restructure, informed Shanghai Narcissus investors yesterday that a new bailout plan was not under consideration.

Rather, the exchange and securities regulatory officials were huddling this week to work out new measures by which shares could be removed from the market.

Shanghai Narcissus lists both US dollar-denominated B shares and yuan-denominated A shares. Last Thursday, the company announced its fourth consecutive year of losses, reporting a net deficit of 145.7 million yuan (about HK$136.52 million) for last year.

The company immediately applied for a six-month waiver to work out a restructuring, as required by delisting rules adopted by regulators in February. However the exchange on Friday rejected that proposal, saying it would not permit a grace period.

Formal notification by the China Securities Regulatory Commission (CSRC) that Shanghai Narcissus will be delisted may come as early as today.

As part of the delisting process, it is understood that the CSRC is preparing to launch an over-the-counter (OTC) market to manage the sale of delisted shares.

Listed firms posting three years of consecutive losses are presently assigned Particular Transfer (PT), a quasi OTC status that allows for share trading only on Friday at limits of 5 per cent price gains, and no limit down.

Ordinary shares are restricted to 10 per cent gains and losses for each trading session. However the new rules are expected to take that process one step further, designating a handful of securities companies to provide counter trading services for the delisted shares. They will detail where, when and at what price those shares can be traded.

Analysts have applauded the determination of securities regulators to remove the worst performing companies from the stock markets.

'This means the Chinese government is doing all the right things about stock market reforms,' said Joe Zhang, UBS Warburg's head of China research.

'If you take this measure together with the opening of the B share market to domestic investors and the recent crackdown on fund managers, it shows a pattern of mainland regulators integrating domestic market standards with world practices and creating a more equal and transparent market.'



Washing-machine firm's listing faces axe today