Chinese regulator plays down delisting risks after small-cap selloff

Chinese regulator plays down delisting risks after small-cap selloff

FILE PHOTO: A Chinese national flag flutters outside the China Securities Regulatory Commission (CSRC) building on the Financial Street in Beijing, China July 9, 2021. REUTERS/Tingshu Wang/File Photo

China’s securities regulator said on Tuesday that tighter rules would not spark a wave of delistings, in an apparent attempt to assuage market panic following a two-day sell-off in small-caps.

The watchdog published draft rules on Friday to strengthen the supervision of company listings and delistings, triggering fears that a slew of companies will be kicked off stock exchanges. An index of small-caps tumbled 11% over Monday and Tuesday.

Higher dividend requirements will put some companies under “special treatment” in a bid to flag risks to investors, but will not lead to delistings of such firms, the China Securities Regulatory Commission (CSRC) said in a statement late on Friday.

The watchdog estimates only more than 80 companies would be affected.

The CSRC also refuted the view that new delisting rules would hit small caps, saying that only about 30 companies would be delisted next year under the new regulation.

Another 100 companies could risk being delisted by the end of 2025, but they still have more than 18 months to improve themselves to avoid such a fate, the CSRC said.

New delisting rules are aimed at “weeding out ‘zombie shell companies’ and ‘black sheep’, but not targeting small-caps,” the watchdog said.


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