Recently, the Shanghai Stock Exchange announced the decision to terminate the listing of St Xinyi, making it the first delisting company of A-Shares this year; St egger “lock” will close at less than 1 yuan for 20 consecutive trading days, becoming the first company to touch “1 yuan delisting” this year. Some market participants said that the gradual normalization of delisting not only matches the solid promotion of the comprehensive implementation of the reform of the stock issuance registration system, but also helps to speed up the survival of the fittest in the market and attract long-term funds into the market.
The delisting system of A-Shares has been established for more than 20 years, but the delisting rate of listed companies is far lower than that of mature markets Haitong Securities Company Limited(600837) the research report said that in the past, the A-share delisting system was not perfect, the delisting index setting was unreasonable, and the delisting process was long and inefficient, resulting in the inability to effectively clear the companies that should have been delisted. These companies were gradually marginalized and produced a large number of small market value companies, occupying valuable market resources. Since 1999, only 147 A-share companies have been delisted. Absorption and merger, continuous losses and privatization are the main reasons for delisting, while 29 companies have been delisted due to losses for four and three consecutive years, accounting for 20%. Since 2019, the delisting rate of A-Shares has accelerated significantly, and the number of delisting from 2019 to 2021 is 10, 16 and 20 respectively.
Imperfect delisting system and low delisting rate are one of the main factors affecting the healthy and stable development of A-share market. In recent years, regulators have “zero tolerance” to crack down on various violations of laws and regulations, and the number of companies whose financial fraud has been forcibly delisted has increased. However, it should be noted that retail investors are still difficult to change the bad habit of “poor speculation”, and hot money also makes waves from time to time. The st sector is regarded as the “sweet cake” of Bo silly and speculation. Since last year, some st stocks have soared, which runs counter to the concept of value investment. For example, St Chengxing rose sharply from the lowest 1.86 yuan in May last year to the highest 14.29 yuan in December last year, with an increase of more than 650%. Even st Xinyi staged a sharp rise of 0.85 yuan to 2.65 yuan from February to September last year, with an increase of more than 210%. From May to September last year, St egger also doubled its share price.
The special meeting of the financial committee of the State Council held a few days ago proposed that “long-term institutional investors are welcome to increase their shareholding ratio”. A spokesman for the China Banking and Insurance Regulatory Commission said recently that in the next step, the China Banking and Insurance Regulatory Commission will give full play to the long-term investment advantages of insurance funds and guide insurance institutions to allocate more funds to equity assets.
However, it should be noted that the lack of survival of the fittest in A-Shares is one of the factors that hinder the entry of long-term funds into the market Zhongtai Securities Co.Ltd(600918) the research report said that the root of restricting the entry of long-term funds into the market is the “weakening of investors’ expectations” for the future, which is related to a series of chronic diseases of the system, including the “survival of the fittest” mechanism, which is the most fundamental mechanism for the allocation of resources in the capital market. Many garbage companies that have not been delisted occupy too many listing resources and favor the issuance of additional shares, constantly lowering the overall roe level, which is not conducive to the healthy trend of the stock index. In the long run, the trend of the index is closely related to the overall roe performance of listed companies. The one-way expansion of the A-share market lowered the overall roe upward space of the market index and exacerbated the “weakening of expectations” of investors.
It is an inevitable trend to strictly enforce the delisting system and form a normalized delisting mechanism Haitong Securities Company Limited(600837) pointed out that this year’s government work report proposed to fully implement the stock issuance registration system, and the delisting system is an important supporting system for the implementation of the registration system, which helps to ensure that the market ecology under the registration system can realize the self purification of the survival of the fittest, realize the dynamic balance of the number of A-share listed companies, alleviate the capital pressure brought by the issuance of listed companies to the market, and also help to optimize the resource allocation function of the capital market.
Investors should see that the delisting fate of St Xinyi and St egger cannot be changed. The former was forced to withdraw from the market due to major violations of law due to financial fraud, while the latter’s business has stagnated and has been issued non-standard audit opinions by annual audit accountants for two consecutive years. Both st Xinyi and St egger have fallen by more than 60% since September last year, bringing painful losses to speculators. This warns retail investors that the delisting risk disclosed by many st stocks in the near future must be kept away from blind “speculation”.
