Bourses tighten rules on trading breaks
Print Edition
CHINA’S two stock exchanges yesterday announced stricter rules on trading suspensions by listed companies, a move that is expected to increase the chances of A shares’ inclusion in the MSCI indexes.
According to statements by the bourses, listed firms planning major asset restructuring cannot suspend trading for more than three months, while trading suspension of firms preparing for non-public offerings must not exceed one month.
The exchanges also outlined detailed trading suspension rules regarding ownership handovers, asset transactions and the signing of major contracts. Companies are required to improve information disclosure during trading suspension.
“The new rules aim to curb random trading suspensions, overlong suspensions and insufficient information disclosure during suspensions,” the Shanghai Stock Exchange said in its announcement.
With a boom in mergers and acquisitions in China, trading suspensions are common among listed companies. However, some have been accused of abusing the system to halt trading for asset restructuring in order to shore up stock prices, and then claiming the deals failed.
During China’s stock market meltdown last year, more than half of its 2,800 listed companies suspended trading to prevent share prices plunging, citing the vague phrase — “significant matters.”
The move to enhance trading suspension regulation came ahead of MSCI’s decision in June on whether to include A shares in its widely traded emerging market index. It’s the third time for MSCI, a global provider of financial indices, to review A shares. The inclusion, if it happens, is set to attract billions of dollars from funds to China’s stock market.
MSCI in April cited issues such as widespread voluntary trading suspensions as roadblocks to the inclusion of A shares in the MSCI Emerging Market Index.
“The new rules boost the odds for A shares to be included,” said Li Lifeng, an analyst with Sinolink Securities.
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