Exchange mulls tool for delisting start-ups

By Li Xiang (China Daily)
Updated: 2011-03-11 13:17
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BEIJING - The Shenzhen Stock Exchange is considering a delisting mechanism for companies listed on the ChiNext start-up board in an effort to lower the high valuations of listed companies and to better protect retail investors, Chen Dongzheng, the exchange's president, said on Thursday.

Speaking at news briefing in Beijing, Chen said that policymakers are discussing two proposals. One is to set up a direct delisting system that will not allow backdoor listings, and the second is to transfer the delisted companies to the over-the-counter (OTC) market.

"The top policymakers have not reached a consensus," said Chen, who declined to reveal a timetable for the launch of the system.

The absence of a delisting mechanism on the country's start-up board is one of the major factors behind high stock valuations. The securities regulator has realized that there is an urgent need for such a mechanism to curb excessive speculative trading on the board.

A total of 186 companies are currently listed on the ChiNext board, which was launched in 2009 for the country's technology-and-innovation-driven companies. The market capitalization of the start-up board has reached 815 billion yuan ($124 billion) with an average price-to-earning ratio of 69 times.

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In the meantime, Chen said that the bourse plans to attract 350 new listings this year and will accelerate the development of the country's multi-layer capital market, including the OTC market, to better help the start-up companies grow and raise funds.

China is considering expanding the OTC market by allowing more non-listed start-ups to raise funds on the market. Chen said that the Shenzhen Stock Exchange will help accelerate the expansion by providing the necessary trading technology support.

China established the first OTC stock-trading pilot program in Beijing's Zhongguancun Science Park in 2006. Similar to the Over-the-Counter Bulletin Board (OTCBB) in the United States, the trading system provides an electronic financing platform for nonlisted start-up companies to raise funds.

It has been reported that the country's securities regulator is considering gradually expanding the OTC trading system to more cities across the country and will reopen the market to retail investors.