Two thousand eight hundred and two days and counting. That is how long investors have been locked into New City China Development, a property concern, since the company’s 240m floated shares were suspended from trading on the Hong Kong Stock Exchange. New City has dragged its feet through a three-stage delisting process ever since. From the HKSE, which unlike other exchange groups acts as its own primary regulator for listing-related matters, this is not good enough.
The exchange’s own policies stipulate that if a stock needs to be suspended from trading, for whatever reason, the duration of that suspension “should be kept as short as is reasonably possible”. Yet right now there are 22 companies that have been suspended for more than three months without entering delisting procedures; of those, seven have been approved to resume trading in principle. That implies 15 sets of shareholders in limbo. Perhaps worse, there are several other stocks, in addition to New City, that have spent much longer than the prescribed six months in the final stage of delisting.
The HKSE might argue that keeping companies in cryogenic storage gives an owner or a provisional liquidator a chance to revive listings through some kind of reverse takeover, and thus provides a service to providers of capital. Ultimately, that may be so: plenty of stocks do indeed return to market, in one guise or another. But investors should not be expected to run portfolios on the basis that any given holding may disappear for years on end. It is also hard to reconcile the HKSE’s relaxed approach to its own guidelines with its statutory duty to maintain an orderly, informed and fair market.