Not Good Enough: TGood Electric, a Sino-German venture, was the first member of the ChiNext Board nearly three years ago. However, its share price is hovering near 52-week lows.  Photo: TGood

Translated by Andrew Vanburen from a Chinese-language piece in Quanjing Daily

PARTING IS SUCH sweet sorrow.

Apparently, a surprisingly large number of Chinese SMEs may soon be sharing the lovestruck Romeo’s sentiment.

That’s because a Shenzhen stock market official recently stated that the nearly three-year old ChiNext board – often likened to “China’s Nasdaq” – may eventually witness a deluge of delistings amid a winnowing out process that would make Charles Darwin proud.

This should put shareholders in the over 300 listcos on the SME board on edge.

And what’s more, bourse authorities are doing nothing to stop the potential trend, but are actually "educating" those wanting out on how to take leave of the board, with forced expulsions not being ruled out for laggards and violators.

TGood recently 15.07 yuan

In late May, the Shenzhen Stock Exchange held a conference on the other side of the country in Beijing which attracted 161 chairman and other top executives from 83 listed enterprises on the ChiNext to discuss how firms seeking to go down the self-imposed privatization road might proceed.

That being said, the stock market regulator is not willing to lose listcos willy-nilly, but still went on to restate and re-clarify existing rules to make sure that members of the SME board are truly ready and willing to bid the bourse farewell.

“The biggest difference between the old way of doing things and the current way is that the latter will now more seriously interpret the existing regulations, specifically that which states that if a listco is censured three times in any 36-month period, then the result is more likely to become an expulsion from the ChiNext Board,” said an unnamed Shenzhen bourse official at the meeting.

The official added that the threat of forced delisting should not simply be an empty threat on paper, but should be implemented more regularly to deal with listcos whose “censure quota” is either met or exceeded so as to make its deterrent effect more than just a paper tiger.

ChiNext not an ATM

Some ChiNext listcos consider the board a cash machine.
Photo: Internet

While not naming names, the official went on to say that those firms who have just received their first censure from the stock market authorities should be put on notice.

“They should be fully aware that they have violated existing market regulations and the censure should not go unheeded as a warning but should serve as an incentive to improve conduct and not be a detriment to the overall health and integrity of the ChiNext Board.”

He added that the capital market rules were in place to protect the orderly operation of the bourse as well as guard the interests of shareholders, and existing rules and consequences should be sternly carried out where applicable.

“We are no longer going to tolerate those listed members who consider the ChiNext their own personal ATMs,” the official added.

“This is part of the ‘old way’ of thinking and will no longer be accepted.”

Instead, firms that are accepted onto the three-year old capital raising platform should be encouraged to treat shareholders’ monies as dearly as they would their own.

See also:

CHINA SHARES: Market Watchers All Over Map

HALF HEARTED: 50% Of PRC Firms Expect Weaker 1H

ALL BLACKS: China’s Listed Brokerages All Profitable

NEW KID ON BLOCK: 21 A-Shares In Red; 4 In Hot Water

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