(Yicai Global) Aug. 16 -- The Shenzhen Stock Exchange yesterday sent a warning letter to HR Century Union Corp. [SHE:000892], diversified Chinese media production company, after it violated trading suspension regulations.
The firm successfully applied for a ten-day trading suspension on July 18 and extended this for five days in order to sign a significant contract. However, upon resuming trading on Aug. 8, there was no indication of any recent contract signings, the stock exchange said.
The China Securities Regulatory Commission has recently called on listed companies to exercise suspension rights prudently in order to ensure that market transactions remain consistent and stable.
Shanghai Stock Exchange also recently enforced strict regulation regarding the improper use of suspension rights by listed companies. So far this year, the exchange has sent cautionary letters to more than 30 companies concerning this issue, including Beijing Sanyuan Foods Co. [SHA:600429], Elion Energy Co. [SHA:600277] and Shanghai Aijian Group Co. [SHA:600643].
Between 230 and 280 A-share listed companies suspended trading (including cases of continuous suspension) each day in the middle of July, statistics show.
A suspension culture prevails among firms on the A-share market. Official reasons for suspensions include undisclosed important matters and preparation for significant matters, especially ahead of possible price falls. In such cases, listed companies actively cooperated with major shareholders to suspend trading and then wait for future opportunities before resumption.
Some listed companies prefer to bring a halt to trading, often for a prolonged period of time, when faced with a 'barbarians at the gate' scenario, rather than maintaining communication and responding reasonably.
US-based index provider MSCI suggests that Chinese regulators more strictly control A-share trading suspensions. If a security is suspended for 50 days, it should be de-listed regardless of any reasons.