A record 29 companies were delisted from the Hong Kong stock exchange last year, most of them expelled under a new rule, according to data from Hong Kong Exchanges and Clearing, the operator of the bourse. That is almost three times the number of firms that dropped off the exchange in 2018. Ten of them withdrew voluntarily as their major shareholders took them private, including the tycoon Gordon Wu Ying-sheung’s Hopewell Holdings which was first listed in 1972. The remaining 19 were expelled from the stock exchange under a new delisting rule introduced in August 2018 which allows the listing committee to expel a company permanently if its shares are suspended from trading for between 12 and 18 months and it is unable to solve the problems that led to the suspension. Listed firms get ‘F’ on ESG report, put on notice as rules become mandatory in 2021 Those companies were suspended from trading for a mixture of reasons, ranging from shareholder disputes and poor management to fraud, failure to announce results or other regulatory issues. The first deadlines to convince the exchange they were ready to resume trading came on July 31. Eventually, 31 firms missed the deadlines last year and 19 of them were delisted. The other 12 firms are appealing against delisting, according to a spokesman for HKEX. The number of delistings in 2019 is almost triple the 11 that left the exchange the previous year, when seven firms voluntarily cancelled their listings to go private and only four were forced to delist. There were five delistings in 2017, and six each in the three years before that, according to data from Refinitiv. “We believe that the new delisting regime can effectively improve corporate governance of listed issuers,” an exchange spokesman said. Previously, a listed companies could suspend the trading of its shares for many years without facing any action. “The new regime has incentivised suspended companies to act promptly towards trading resumption,” the spokesman said, adding that eight firms have successfully resumed trading since the new rule was introduced. Dynasty Fine Wines Group resumed trading just a few days ahead of the July 31 deadline having been suspended for more than six years. Wireless solutions company Coolpad Group resumed trading on July 19 after its shares had been dormant for two years. The latest main board company to be delisted was Hsin Chong Group Holdings, an 80-year-old, home-grown construction firm that built Hong Kong’s iconic Ocean Park and the former Kai Tak Airport. The company said in a stock exchange filing on Friday last week that it had failed to resume trading before the July 31 deadline, and its appeal was later rejected. Its shares were delisted on Tuesday. China Candy Holdings, a mainland jelly confectionery maker that was listed on the second board, the GEM, was also delisted on New Year’s Eve. The rise in delistings may continue this year, with 54 companies likely to be expelled if they fail to resume trading before their deadlines. Ten firms face a deadline at the end of this month, including Convoy Global Holdings that was embroiled in the largest financial scandal of the last decade. Convoy said in a stock exchange filing that it has been actively seeking to resume trading of its shares. Kelvin Wong Tin-yau, chairman of the Financial Reporting Council, said the new delisting rule can encourage auditors and listed companies to seek ways to resolve their accounting problems at an earlier stage. Convoy scandal continues as firm seeks damages from Ernst & Young “The threat of a delisting would force the companies to improve their disclosure and to seek ways to make an agreement with their auditors,” Wong said. The delisting rule would also encourage investors to avoid poor quality companies, said Kenneth Leung Kai-cheong, a lawmaker for the accountancy sector. “With the new delisting rules, investors know they may suffer a loss if the companies are delisted. The new rule will thus encourage investors to pay more attention to the corporate governance and management of the company,” Leung said. Former broker and lawmaker Chim Pui-chung, 72, nicknamed the golden banker after helping troubled companies to resume trading in the 1980s and 1990s, disagreed. “Small investors will lose everything when a company is delisted. The exchange should allow more time for the suspended companies to find new investors to restructure their business to resume trading in a bid to offer better protection to the small investors,” Chim said. Hong Kong’s market regulator, the Securities and Futures Commission, supported the HKEX delisting regime. “The rules are designed to introduce a robust framework to facilitate timely delisting of companies no longer meeting the continuing listing criteria and provide certainty to the market on the delisting process, to maintain the quality and reputation of Hong Kong’s securities market. The process is fair and transparent,” a spokesman for the SFC said.