The stock exchange yesterday put on hold its controversial plans to delist 'penny stocks', in an attempt to rescue the low-priced shares after they suffered a huge sell-off on Friday. After a meeting called by government officials - and in an embarrassing backflip from plans contained in a consultation paper issued four days ago - Hong Kong Exchanges and Clearing said that it was responding to the market panic by reconsidering the scheme to cancel the listing of stocks priced below 50 cents. It hopes to avert another big slump in the sector when the market opens this morning. 'If the penny stocks continue to fall on Monday, it will no longer be related to the exchange's consultation paper. It will be for other reasons only,' said exchange chairman Charles Lee Yeh-kwong. The reversal was announced at a hastily convened press conference jointly hosted last night by the government, the stock exchange, and the Securities and Futures Commission. At the conference, Mr Lee announced that Part C of the exchange's original consultation paper - which set out 11 delisting criteria, including the contentious suggestion to drop firms which trade below 50 cents for 30 consecutive days - was being put on ice. Stockbrokers had slammed the exchange as 'irresponsible and irrational' in making the proposals last week amid a bearish market. They welcomed yesterday's turnaround. The 50-cent plan, which triggered a sell-off in which some stocks plunged almost 90 per cent and wiped $10 billion from the exchange, is likely to be scrapped when a new paper on delisting criteria is issued in October. Mr Lee said the exchange 'would be open-minded to listen to market comment to make changes to the proposed 50-cent threshold'. 'The exchange will also consider the market's call to introduce an over-the-counter trading mechanism for investors to trade the shares after companies are delisted,' Mr Lee said. Investors had also feared there would be no mechanism for trading delisted stocks. The announcement was made after meetings yesterday afternoon between Secretary for Financial Services and the Treasury Frederick Ma Si-hang, Securities and Futures Commission chairman Andrew Sheng, Mr Lee and exchange chief executive Kwong Ki-chi, as well as representatives of several major brokers' industry bodies. Mr Ma said the turnaround was in reaction to market demand, but refused to comment on whether the government had intervened to force the change. Hong Kong Stockbrokers' Association chairman Wilfred Wong Wai-sum welcomed the move and believed it would calm nervous investors. On Friday, investors rushed to dump almost all 386 stocks trading below the 50-cent threshold - 48 per cent of all 791 main-board listed companies. Brokers had warned that the penny-stock sell-off could infect blue-chip stocks. Some small brokerages which had invested in penny stocks themselves may have collapsed, they said. The delisting proposals were aimed at removing the worst-performing stocks, and so enhance corporate governance. Mr Lee said the panic selling was due to a 'misunderstanding'. 'The market mistakenly believed that shares with a market price below 50 cents were to be delisted automatically,' he said. 'However, we were only proposing that stocks falling short of the 50-cent mark should make good the deficiency by consolidating their shares, or by other means.' Mr Ma said the government supported a delisting mechanism, but it should meet market demand. Legislator Henry Wu King-cheong, who represents the financial services sector, said that he supported yesterday's decision. Mr Lee said other recommendations, such as increasing the minimum market capitalisation for new listings from $100 million to $200 million, were not so controversial and would not be subject to a new paper.