Chinese exchanges propose simplifying delisting process

The Shanghai Stock Exchange and the Shenzhen Stock Exchange on Monday published proposals for simplifying the delisting process for public companies as China pushes forward with capital market reforms aimed at boosting investment.

The proposed changes are intended to improve the overall quality of listed companies and protect investors’ interests by forcing those firms that fail to meet certain criteria to delist from the exchanges.

Companies would be automatically delisted if their shares trade below 1 yuan for 20 consecutive days, or if their market value falls below 300 million yuan (US$45.86 million) for 20 days, draft documents published by the two exchanges for consultation showed.

The drafts also specify financial conditions under which companies would be delisted, including inflating net profit by more than 100 percent of the reported annual net profit for three consecutive years.

For those companies, the delisting process would be further shortened to two years from three years.

The period between a stock’s last trading day and the final delisting would be reduced to 15 trading sessions from 30, to improve pricing efficiency and reduce possible speculation, the documents said.

A process of suspending companies and resuming the listing before a final delisting decision is made would also be halted.

There were a total of 4,156 listed companies on China’s A-share market, with a combined market value of 76 trillion yuan, as of Friday.

Yan Kaiwen, an analyst with China Fortune Securities said that while there had been many newly listed companies in the past two years, particularly after the launch of Shanghai’s tech-focused STAR market and IPO reform on Shenzhen equivalent ChiNext, the relatively low number of delisted companies during the same period was “abnormal.”