RULES DIFFERENCES CAUSE PROBLEMS FOR CHINA-LISTED COMPANIES

New rules in China that permit the suspension of ‘A’-listed shares on the Shanghai stock exchange if there are significant price moves look set to increase the potential problems that are arising through different suspension rules in Hong Kong and in Shanghai. In Shanghai, companies must suspend trading until media reports are clarified. In Hong Kong, companies can request suspension before clarifying media reports, but are not obliged to do so. Last Monday the ‘A’ shares in China Life were suspended in Shanghai, but the ‘H’ shares in Hong Kong remained tradable from 9.30am to 9.50am, during which 10 transactions worth HK$200m ($25.6m) were made. According to a report in Shanghai Securities News , citing an unnamed source on the Shanghai exchange, a staff official on the exchange read a report at 6pm on Sunday April 22 that China Life’s parent firm would list its shares. The official attempted to contact China Life’s senior executives, who were on a roadshow in Europe. An official at the assurer denied the report, so the exchange official told the company to suspend trading in its ‘A’ shares the following day, and told it to do the same for its ‘H’ share. The Shanghai exchange attempted to contact the Hong Kong exchange, but could not reach anyone until 9am on Monday April 23, resulting in the gap between the Shanghai suspension and the Hong Kong suspension. A new rule has now been introduced by the China Securities Regulatory Commission, which said yesterday that it would suspend the trading of stocks after unexplained large intraday moves, until the company concerned issued a clarification. Hong Kong’s exchange noted that the markets were full of rumours and that, if it followed the new Chinese mainland rules, there would be several hundred suspensions a day.