China sobers up amid IPO bonanza, tightens rules to expel dud companies from stock exchange
- The new delisting rules issued by the Shanghai and Shenzhen exchanges are critical to improving the quality of China’s stock market by reining in excessive speculation, analysts say
- The rules will apply stricter requirements on factors like market cap and revenue to judge if a company’s listing status should be retained
The Shanghai and Shenzhen stock exchanges plan to impose stricter revenue and market capitalisation yardsticks to make it easier and quicker to delist badly performing members, according to new rules proposed last week and pending public feedback.
“The enforcement of the new rule will raise the quality of China’s capital market by weeding out poorly run companies,” said Yi Bin, an analyst at Huaxi Securities. “Market resources will be skewed towards high-quality companies after the removal of dodgy companies.”
Under the proposed terms, companies reporting an annual loss and revenue of less than 100 million yuan (US$15.3 million) for two straight years will be booted out, shortening the rule from three years. Stocks that trade below a market cap of 300 million yuan for 20 consecutive days will also lose their listing status, the exchanges said.