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Punters shrug off warnings
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Yang Yunfei
CHINESE punters turned a deaf ear to official warnings on Friday and continued to snap up shares of even the most severe loss-making firms.
Three out of eight companies labelled particular transfer (PT) for racking up losses for at least three consecutive years soared their five per cent daily trading limit up as local investors largely dismissed repeated official warnings that these companies were at risk of being delisted in the very near future.
PT counters, the most speculative and volatile stocks in the market, are traded only on Fridays and have a five per cent upper limit but no floor limit.
Market regulators have vowed to kick off firms that post three or more years of losses if they fail to turn around within six months in a bid to improve the quality of listed companies and encourage rational investment.
A concrete delisting framework was announced on March 22, saying that PT firms would be stripped of their Shanghai or Shenzhen exchange listings if they failed to turn out turnaround plans.
The announcement might sound the death knell for six PT firms which have already forcasted their fourth or more year losses for 2000. They are most likely be on the first chopping block, analysts said.
Officials said that the first delisting would be carried out before June and repeatedly warned investors against blind speculation in PT counters, saying that these stocks had huge risks but little possibility of turing around.
Brokerages throughout the country, acting under orders from the two stock exchanges, posted notices in their transaction halls last week to caution investors to think twice before buying into PT stocks.
Analysts said that the trading sessions of PT firms were numbered as market regulators were determined to clean up the country's decade-old markets rife with speculation and shaky, debt-ridden firms ahead of its WTO entry widely expected later this year.
But punters, who didn't mind “Dancing with Risk", a play on the title of the popular US movie “Dances with Wolves", continued to drive up PT shares prices to astounding highs without regard to the fundamentals of these companies, betting that white knights would come to the rescue of these chronic money-losers in some form of government-backed restructuring.
But analysts said that the chances of some PT firms being bailed out through restructurings were dimmed by the relaxation of initial public offering (IPO) rules, which have reduced incentives to buy into ailing companies to get backdoor listings.
“Undoubtedly, some firms are sure to be delisted this year, ”Li Xiaoxue, who is in charge of the corporate governance department of market watchdog China Securities Regulatory Committee, was quoted as saying by State media last week.
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