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Sick firms face boot
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LISTED firms which post losses for three or more years will be given six to 12 months to turn around or face delisting, according to new rules published on Saturday.
The watchdog China Securities Regulatory Commission (CSRC) said the firms, subject to trading curbs under existing regulations, will be stripped of their stock listings after the grace period if they fail to shape up.
Regulators are targeting roughly 60 companies that have become some of the most volatile counters on the Shanghai and Shenzhen bourses.
“The new rules are aimed at better regulating the stock market,” a CSRC spokesman told the media.
“Despite steps regulators have taken to alert investors of risks, the stock market is still rife with speculation on rumours of restructuring or a turnaround, while blue chips are ignored,” the spokesman said.
Investors have pounced on the shares, hoping to cash in on rumours they will be rescued in government-backed bailouts. The result last year was some of the most stunning share surges, though of China's worst-operated firms.
Analysts say delistings would improve the health of the market and encourage management of other firms to improve corporate responsibility.
Despite having the power to delist firms with three years of losses, regulators have never before taken that drastic step, partly because the guidelines allowing them to do so were murky and there was no specific timeline for the grace period — until now.
Under the new rules, eight firms which have posted three years of losses are already set to get the boot. These companies, now under curbs known as PT that allow them to trade only on Fridays, would be given just six months to turn around.
The CRSC spokesman said shareholders of delisted firms would be able to transfer their shares but no legal counters for such transactions are available now. He said CRSC will draft new rules on the transfers and deposits of such shares.
(SD-Agencies)
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