CRI听力:GEM Board Companies Delisting System Introduced

The new rule released by the Shenzhen Stock Exchange mandates that companies listed on the Growth Enterprise Market board, which have losses for three consecutive years, will be delisted. The policy does not allow these companies to reissue stock through reconstitution.

Financial Analyst Yang Delong from Southern Fund Securities says the more stringent market rule has led to a shakeup on the second board this week.

"Based on the new rule, there are now about 14 companies on the GEM board facing share buybacks. Many stocks on the GEM board have been priced too high and carry greater risks of bubble bursts. When the new policy is implemented starting in May, some of these companies may have to be delisted, and the value of their stocks will drop to zero. All of this information has resulted a sharp drop on the stock market this week."

The Growth Enterprise Market board, also known as the Second Market Board, aims to finance high-growth startups with lower requirements for listing. The most successful GEM board in the world is the Nasdaq.

Many countries around the world have their own editions of the GEM board. China established the GEM board in 2009.But malicious speculation on the board has also occurred frequently.

Some of the companies have found ways to stay in the market after failure due to bad business performance. Most have bought a shell company to restructure or infused a huge amount of capital to save their stock prices and hide problems.

The China Securities Regulatory Commission has stressed it will improve the board's acquisition and delisting mechanism. Earlier this year, the Shenzhen Stock Exchange Center publicized the draft edition of the delisting policy.

Financial Analyst Wu Yu from Gold State Securities says GEM board stocks will have to be much more competitive to survive in the near future.

"What is controversial is that many companies' stock can be reissued through reacquisitions. But such behavior is not supported on the second board any more. Plus, the most important threshold is that they have to show stable growth to stay in the market."

Market analysts say the current trend of the overall performance on the GEM board will still be downward for some time. Financial Analyst Yang Delong from Southern Fund Securities suggests that investors be more cautious about investing in GEM stocks.

But other market insiders say it's unlikely to see some companies be delisted from the GEM in the short term. They say although the stringent policy has been set up as a warning in the market, at the same time, it also will have a positive impact on other stocks with good performances.

For CRI, I'm DLL.