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Hong Kong bourse needs to demeanour again during delisting mechanism

It’s been 14 years given Hong Kong’s penny batch fiasco, and time for a internal bourse to put a calamity behind it and demeanour again during introducing a delisting mechanism.

The deficiency of a transparent delisting resource in a city was one of a risks lifted by a Shenzhen Stock Exchange on Friday forward of a soon-to-be launched batch bond with Hong Kong Exchanges and Clearing.

The second cross-border scheme, approaching to be launched in November, will concede general investors to trade in 880 Shenzhen-listed companies while mainlanders can trade 417 Hong Kong stocks. The Hong Kong and Shanghai batch bond was a initial cross-border trade scheme, permitting mainlanders to trade 318 Hong Kong bonds and general investors to trade 568 Shanghai-listed stocks.

The Shenzhen bourse final Friday expelled some-more minute information about a scheme, including a warning for mainland investors to know a risks outset from a differences between Hong Kong and mainland listings and trade rules.

Unlike mainland China and many western markets that will delist companies that trade next a certain share cost or if they don’t accommodate certain financial requirements, Hong Kong doesn’t have a delisting resource to mislay feeble behaving stocks. As a result, there are hundreds of penny bonds that have flighty share cost movements.

Any association listed in Shanghai or Shenzhen that posts a detriment for 3 uninterrupted years is delisted from a bourse and demoted to a over-the-counter market. Companies that are guilty of vital bootleg activities, or that have unsuccessful to accommodate financial and trade standards, face mandatary delisting.

Nasdaq requires companies to be delisted if a bid cost falls next US$1 for 30 days in a row.

n 2002, Hong Kong Exchanges and Clearing deliberate introducing a possess delisting manners though it usually finished adult as a calamity of a “penny batch fiasco”.

In Jul 2002, a sell launched a conference paper looking during either penny bonds – those companies trade next 50 cents for 30 days – should be delisted.

A day after a paper was issued, investors rushed to dump some-more than 300 penny stocks, causing a internal market’s capitalisation to tumble by HK$10 billion in a singular day.

In an annoying move, a batch sell scrapped a conference practice 4 days later.

The disaster saw many casualties – besides a many sell investors who mislaid money. The afterwards Secretary for Financial Services and a Treasury Frederick Ma Si-hang publicly apologised, while while HKEX arch executive Kwong Ki-chi mislaid his HK$7.95 million a year pursuit after resigning for “personal reasons” in Nov 2002.

The fallout competence explain because a subject of a delisting resource hasn’t been on a bulletin again.

But it competence be time to plead a emanate again as there is now speak of revamping a Growth Enterprise Market and a probability of rising a third house for start-ups.

If a revamped GEM and due third house will concentration on start-ups wanting to lift funds, they need to have a transparent exit resource to let a feeble behaving ones go given many start-ups have high disaster rates.

This could yield improved insurance to investors and a repute of a Hong Kong market. Otherwise, this intensity third house competence finish adult built with many feeble behaving start-ups that would harm a repute of a Hong Kong batch market.