BEIJING - The Shenzhen Stock Exchange (SZSE) will accelerate the improvement of the direct delisting mechanism of the ChiNext start-up board in an effort to bring down the high valuation of listed companies, Chen Dongzheng, the exchange's president, said on Friday.
"The direct delisting system is the most fundamental and the most needed system on the ChiNext board, and the adoption of such a system will help promote the healthy development of the board in the long run," Chen said, adding the high valuation of recent listings on ChiNext was partly due to the absence of the delisting risk on the market.
The exchange has submitted an improvement plan to the China Securities Regulatory Commission and Chen said the goal was to speed up the delisting process, highlight risks to investors and prevent potential backdoor listings.
The annual average delisting rate has been less than 1 percent in China's capital market over the past 10 years, which is much lower than other major capital markets in the world. The US Nasdaq stock market has an annual average delisting rate of 8 percent and the rate is even higher on the London Stock Exchange's Alternative Investment Market, where around 12 percent of listed companies are removed annually.
"We are trying to make the board more market-oriented and ultimately let the market separate the wheat from the chaff," he said.
Chen, a member of the Chinese People's Political Consultative Conference, also proposed setting up a judicial relief mechanism by establishing an investor protection fund to safeguard the interests of retail investors.
"Retail investors are usually the biggest victims of a company's delisting, so we need to establish such a system to better protect their interests," he said.
Chen confirmed that the bourse will introduce the ChiNext Index in the first half of the year but said the timing of the official launch will depend on the condition of the overall market.
"We can only introduce the index when there are sufficient listed companies and when the overall market condition is stable," he said.
He also suggested promoting the development of over-the-counter (OTC) markets to create a truly multi-layer capital market in China and to help small- and medium-sized enterprises grow and raise funds.
