New Third Board Calls Halt to Equity-Loan Pledges; Liquidity Is Squeezed Again
Yicai Global
/SOURCE : Yicai
New Third Board Calls Halt to Equity-Loan Pledges; Liquidity Is Squeezed Again

(Yicai Global) Sept. 21 -- The New Third Board's liquidity is being squeezed again after the Nasdaq-like exchange stopped accepting applications for equity-loan pledges between listed firms and brokerages and China Securities Depository and Clearing Co. suspended all such cases involving brokerages or firms under their control, a source connected with the board told Yicai Global.

The Beijing-based New Third Board, officially called the National Equities Exchange and Quotations (NEEQ), may be concerned about controlling shareholders of listed companies disappearing after pledging most of their shares to securities firms, a source at an NEEQ-listed company told Yicai Global. If it happens, brokerages may dispose of the pledged equity against the interests of small investors.

No document calling a halt to pledged loans involving brokerages on the New Third Board exists, a source told Yicai Global. Yicai Global contacted the NEEQ about the matter, but has not received a reply.

There have been a large number of cases this year. In February, Mr. Wei Qinghua, chairman and general manager of troubled sportswear maker Kolumb Outdoor Equipment Co. disappeared after pledging all the shares in the company, and did not reappear until his resignation was received in May. In March, three shareholders of Dongtian Pharmaceutical Ltd. applied to delist straight after pledging all shares in the firm with a bank for CNY25 million (USD3.75 million).

According to Mr. Hu Zhenggang, director at Hengtai Securities Co., the regulator has not yet explicitly prohibited brokerages from operating equity pledge businesses on the New Third Board, but applying for pledges has become significantly more difficult, and the regulator may impose a cap.

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