Erzhong set to be first Shanghai-listed firm to delist since rule change

[SHANGHAI] Erzhong Heavy Industries is set to become the first firm to voluntarily delist from the Shanghai Stock Exchange since the introduction of stricter listing rules - a further sign that tougher regulation is beginning to drive speculators out of loss-making stocks.

Firms have rarely delisted from the Shanghai exchange but the bourse issued new rules last October requiring that companies must delist following three years of losses as well as issue warnings that they were in danger of delisting.

Trade in Erzhong, a Sichuan-based equipment manufacturer, has been suspended since April following three straight years of losses.

China National Machinery Industry Co, a major shareholder in Erzhong, announced on Monday evening that it would take the company private.

The transaction, which will be conducted in cash, will require no more than 1.04 billion yuan (US$166 million) to complete, according to a statement posted on the Shanghai exchange's website on Tuesday.

Of the 38 firms on the Shanghai and Shenzhen exchanges that published obligatory delisting warnings in late 2014, most have sharply underperformed the market.

The China Securities Regulatory Commission has stated that firms voluntarily delisting under the new rules will have an easier time relisting in the future.

REUTERS