CSC Nanjing Tanker Corp., the first stock set to be delisted from Shanghai’s exchange in seven years as China seeks to bolster its markets, plunged as it began its final 30 days of trading.
Shares of the oil-shipping company, which has posted four consecutive annual losses, fell 9.8 percent to 1.47 yuan at the close, compared with a 1.5 percent decline for China’s benchmark Shanghai Composite Index. The stock, which had been suspended for a year until today, will move to an over-the-counter board for small- and medium-size enterprises after 30 trading days, according to the company.
“The delisting is kind of a warning to investors to keep away from these loss-making companies that don’t have restructuring prospects,” said Wu Kan, a fund manager at Shanghai-based Dragon Life Insurance Co., which oversees about $3.3 billion. “An improvement in the delisting rules may mean the start of expulsions of lots of unqualified companies.”
CSC Nanjing Tanker’s removal is part of China’s efforts to restore confidence in a stock market that’s seen its benchmark index plummet 31 percent in the past three years, ranking it the worst performer among the world’s major bourses. Another 29 Shanghai-listed companies have been warned that they’ll be delisted if losses continue, including CSSC Steel Structure Engineering Co. and Jiangsu Zhongda New Material Group Co., according to the exchange.
Under current rules, three straight annual losses triggers the suspension of share trading, while a fourth year would prompt delisting, according to the Shanghai and Shenzhen stock exchanges. Regulators broadened the delisting rules in 2012 to include companies with revenue of less than 10 million yuan ($1.61 million) and low trading volumes.
China’s securities regulator is also studying more “market-oriented” delisting rules, which may be released this year, the Shanghai Securities News reported last month, citing China Securities Regulatory Commission Chairman Xiao Gang.
Among other stock market reforms, China announced this month that it would allow cross-border trades between the Shanghai and Hong Kong stock exchanges. Regulators have also said they will reform rules to make initial public offerings a registration system similar to that used in the U.S.
China has removed a total of 74 stocks from trading since 2001, while no companies have been delisted in Shanghai since 2007, according to Essence Securities Co. The Shanghai and Shenzhen exchanges list a combined 2,537 companies, according to data from the two bourses.
Nanjing Tanker, which started trading in 1997, is the first company to be delisted from the Shanghai exchange since Daqing Lianyi Petrochemical Co. in 2007. The shipping company had a net loss of 5.92 billion yuan last year with net assets of negative 2.1 billion yuan, it said in an April 12 statement.
With China’s economy slowing and overcapacity plaguing industries such as shipping and steel, some companies are selling assets to pare losses. The nation’s 7.4 percent pace of expansion in the first three months of this year was the weakest pace in six quarters.
China Cosco Holdings Co., the nation’s biggest shipping company, had its delisting risk warning removed this month after it reported an annual net income for 2013 following the disposal of assets including a logistics unit.
Aluminum Corp. of China Ltd., the nation’s largest producer of the metal, also returned to profit last year as it cut costs and sold assets to its parent. Chalco, as the company is known, said last week it’s seeking partnerships with private companies to help it improve profits.
Delisting stocks would curb speculative trading in companies with poor earnings prospects whose gains have been driven by speculation that they will eventually be bailed out by local governments, said Wei Wei, an analyst at West China Securities in Shanghai.
“It’s like gambling and Chinese investors like to do that as they believe that governments will finally step in to restructure these companies,” she said.
— With assistance by Shidong Zhang