Recently, the general office of the CPC Central Committee and the general office of the State Council issued the opinions on promoting the construction of social credit system and high-quality development and promoting the formation of a new development pattern (hereinafter referred to as the opinions). The opinions clearly pointed out that we should strengthen the construction of integrity in the capital market. Strictly implement the compulsory delisting system and establish a virtuous circle mechanism for the survival of the fittest of listed companies. Strengthen the protection of investors’ rights and interests and create an honest and trustworthy financial ecological environment.
After the release of the opinions, on March 30, the Shanghai stock index rose by 1.96%, and the gem index rose by 4.02%. The share prices of a group of shell stocks and delisting risk enterprises fell sharply, Beijing Shuzhi Technology Co.Ltd(300038) , Zhejiang Meorient Commerce & Exhibition Inc(300795) , Xin Jiang Ready Health Industry Co.Ltd(600090) and other risk warning stocks fell by the limit. In 2022, Xinyi, the first compulsory delisting stock, fell by 72.82%, setting a record of the largest decline in the opening of A-Shares in recent 30 years.
Since the implementation of the new delisting regulations at the end of 2020, the delisting ecology of the market has continued to improve, the “shell companies” and “zombie enterprises” have been cleared, and the formation of a multi-channel and normalized delisting mechanism is accelerating.
In the view of insiders, the delisting of Xinjiang Yilu Wanyuan Industrial Investment Holding Co.Ltd(600145) and other risk stocks highlights the zero tolerance attitude of Chinese regulators towards financial fraud, and also reflects the gradual formation of A-share normalized delisting mechanism.
several listed companies touch delisting clauses
More than , companies will be listed on June , etc.
Chunghsin Technology Group Co.Ltd(603996) annual report shows that the audited net profit of the company in 2021 is negative, the operating income is less than 100 million yuan, the audited net assets at the end of the period are negative, and the financial and accounting report is issued with an audit report that cannot express an opinion. According to the relevant provisions of the Shanghai Stock Exchange, the company’s shares have touched the conditions for termination of listing, and the trading of the company’s shares will be suspended from March 31.
Xinjiang La Chapelle Fashion Co.Ltd(603157) also announced that the company has received the notice of Shanghai Stock Exchange to terminate the listing of the company’s shares. The annual report shows that the audited ending net assets of the company in 2021 are negative, and the financial and accounting report has been issued with qualified audit report. According to relevant regulations, the company’s shares have touched the conditions for termination of listing.
This is only a corner of the termination of listing under the normalization of the current delisting mechanism. Since the implementation of the new delisting regulations at the end of 2020, the delisting ecology of the market has continued to improve, the “shell companies” and “zombie enterprises” have been cleared, and the formation of a multi-channel and normalized delisting mechanism is accelerating.
Especially in the centralized disclosure season of annual reports in 2021, some companies have touched or will touch the delisting indicators such as “income + net profit” and net assets, and the A-share market has entered the “intensive period” of delisting risk disposal.
Earlier, due to the false increase of operating revenue in 2018 and 2019, the financial indicators from 2018 to 2020 have actually touched the relevant delisting regulations. Xinyi delisted became the first delisting enterprise in 2022 and was terminated by the Shanghai Stock Exchange. The company has entered the delisting consolidation period since March 30.
On March 24, Great Wall International Acg Co.Ltd(000835) because the net assets attributable to the shareholders of the listed company and the net profit attributable to the shareholders of the listed company were negative in 2021, and the financial accounting report was issued by the accounting firm with an audit report that could not express an opinion, which touched the terms of termination of listing of Shenzhen Stock Exchange Xin Jiang Ready Health Industry Co.Ltd(600090) issued the 22nd risk warning announcement on the termination of the listing of the company’s shares that may involve major illegal compulsory delisting Suna Co.Ltd(002417) , Yihua Healthcare Co.Ltd(000150) and other more than a dozen companies may be forced to delist due to financial delisting indicators. Recently, they have issued risk warning announcements that their shares may be delisted.
In addition, the first delisting stock with par value in 2022 is also expected to lock Egls Co.Ltd(002619) . On March 29, Egls Co.Ltd(002619) fell again to close at 0.59 yuan / share. The company’s share price was lower than 1 yuan for the 18th consecutive trading day. According to the delisting regulations that the closing price was lower than 1 yuan for 20 consecutive trading days, Egls Co.Ltd(002619) has been basically locked in delisting.
“A-share normal delisting mechanism is gradually taking shape.” Haitong Securities Company Limited(600837) chief analyst Xun Yugen said in the research report that 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.
delisting normalization mechanism accelerated
This time, the central office and the State Council Office issued a document proposing to “strengthen the integrity construction of the capital market and strictly implement the compulsory delisting system”, which is expected to further strengthen the normal delisting supervision, form a good market-oriented delisting environment and purify the ecology of the capital market.
The opinions requires that we promote financial services to the real economy with a solid credit foundation. Focusing on strengthening the construction of integrity in the capital market, the opinions stressed that we should further consolidate the foundation of the rule of law and integrity in the capital market, improve the integrity archives of the capital market, and enhance credit awareness and contract spirit. Compact the Information Disclosure Responsibilities of relevant subjects and improve market transparency. Establish a credit commitment system for administrative licensing in the capital market to improve handling efficiency. Urge intermediary service institutions to be diligent and conscientious and improve the professional ethics of employees. Strictly implement the compulsory delisting system and establish a virtuous circle mechanism for the survival of the fittest of listed companies. Strengthen the protection of investors’ rights and interests and create an honest and trustworthy financial ecological environment.
“Investors should pay full attention to the general environment in which the export side will intensify efforts to eliminate companies with poor performance under the reform of the registration system.” A senior market person said.
In fact, delisting, as a basic system of the capital market, has ushered in many heavy documents in the past year. Since 2020, the central Deep Reform Commission has deliberated and approved the implementation plan for improving the delisting mechanism of listed companies, and the opinions on further improving the quality of listed companies issued by the State Council also clearly requires strict delisting supervision.
In July 2021, the central office and the State Council Office also issued the opinions on strictly cracking down on illegal securities activities according to law, requiring to promote the reform of delisting system, strengthen delisting supervision, strictly implement the compulsory delisting system, study and improve the supervision and risk disposal system of delisted companies, and improve the virtuous cycle mechanism of survival of the fittest of listed companies. Improving the delisting mechanism of listed companies has become an important measure to improve the basic system of capital market and deepen the reform of registration system.
According to the data of Haitong Securities Company Limited(600837) Research Report, the number of delisting companies from 2019 to 2021 was 10, 16 and 20 respectively, with a year-on-year growth rate of 100%, 60% and 25% respectively. The number of delisting companies in these three years alone accounted for 31% of the total delisting number of a shares.
Moreover, in recent years, Chinese regulators have severely punished illegal acts such as financial fraud, and the number of companies delisting due to financial fraud is also increasing. From 2019 to 2021, there were 5, 9 and 10 A-share companies delisting due to financial fraud, showing a gradual increasing trend.
“The reform of the registration system needs the cooperation of the corresponding delisting system reform. Only by controlling the import and export of the stock market and forming a benign closed loop can we effectively achieve the purpose of deepening the reform of the capital market and building a good market order. With the complementary and interactive interaction of the registration system and normalized delisting, it will have a positive impact on the capital market.” Li Zhan, chief economist of China Merchants Fund Research Department, pointed out.
