Stock Exchanges to Setup Time Limit for Listed Firms Trading Suspension
The two stock exchanges in China will be setting a upper time limit for listed firms trading suspension, a move which would bolster China’s onshore stock market to be included in the widely tracked global indices. Listed firms in the Shenzhen and Shanghai bourses that seeks to suspend trading over important asset reorganization that will finish the process within a time frame of no more than three months, this based on statements that were released by the two institutions.
Similar time limits were rolled out for continuous plans for assets reorganization, major asset purchase and non-public offerings. In over 1,400 companies that suspended their Shenzhen and Shanghai listed shares in hopes to prevent stock prices from decreasing further after the mainland stock market went through a major correction last June. Such trading suspension created concern from foreign institutional investors as global stock index compiler MSCI have consulted investors on adding China yuan dominated A-shares into the widely tracked benchmarks. MSCI is reviewing the case that will add China’s A-shares market into the benchmarks since 2014.
Arbitrary share suspension is a shared concerns from investors ans regulators both locally and abroad. Around 300 companies are suspended from trading in April this year, half of them cited restructuring as the reason while another 40 percent which described the reason for the suspension as important events. MSCI will be announcing their decision on the A-shares inclusion by next month once they have reviewed China’s onshore stock market;s eligibility that is based on consultations with fund managers who are tracking the indices.
The Chinese stock market is the second largest in the world based by market capitalization and turnover, but the representation in the globally tracked indices is relatively low. According to the MSCI China Index that tracks Chinese firms that are listed in offshore exchanges in Hong Kong and United States which is only 2.4 percent of the MSCI AC World Index. Despite such a low representation to the growing economic influence, the world’s second largest economy has contributed 13 percent to the global GD, 12 percent to the international trade and 9 percent to worldwide consumption.