The number of companies delisted from China’s stock markets are approaching a record high this year, with about half of them losing their listing status after languishing below par value.
A total of 45 companies were removed from the Shanghai and Shenzhen exchanges in the year-to-date period, according to Dongguan Securities. The number of delistings struck an all-time high of 46 last year, it said. Among those, at least 20 companies were delisted for trading below the one-yuan par value for 20 days, one of the conditions which could trigger a delisting.
In recent years, China has been stricter with the delisting rules to restore investor confidence as the nation’s stock market ranked among the worst performers globally this year.
Before the recent uptick, less than 10 companies were delisted each year between 2008 and 2018, with only one each in 2014 and 2016, reflecting authorities’ leniency with respect to delistings to protect state-controlled listed companies.
Still, the numbers are benign. With the 45 companies booted from the exchanges this year, China has a delisting ratio of 0.85 per cent this year, compared with 2.04 per cent in Hong Kong and almost 11 per cent in the US, according to Dongguan Securities.
The regulator is also seeking to cap the number of listings by removing underperformers to create room for new listings after a sweeping reform of initial public offering (IPO) rules earlier this year.
Country Garden’s sales remain at deflated level amid collapsed demand
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“Looking into 2024, a further improvement on the delisting system will probably boost the capital market,” said Fei Xiaoping, an analyst at Dongguan Securities. “That will alleviate the pressure on increased stock supply after the new IPO rules to strike a dynamic equilibrium in the number of listings. That will also help cleanse the capital market and boost the appeal of stocks to investors.”
Among the delisted companies, property developer Yango Group got booted from the Shenzhen exchange in June after a 20th consecutive day of breaching the par value rule and Beijing Honggao Creative Architectural Design showed the same downtrend pattern before it was delisted in the same month.
Besides the breach of the par values, other conditions that could lead to delisting in China include three straight years of losses, falsified accounting and failure to disclose financial results in a timely manner.