Wednesday, September 24, 2014   




Penny stocks face pounding by HKEx

Foster Wong

Thursday, April 18, 2002

HONG Kong Exchanges and Clearing (HKEx) is studying the possibility of

delisting penny stocks in an attempt to improve market efficiency.

The study, which would be completed by the end of the year, would

focus on the requirements a listed company has to comply with

continuously, chief executive Kwong Ki-chi said.

"Those issues include how to deal with the listed company if its

stock price drops to a very low level and the operation of a delisting

mechanism."

Kwong said the exchange had not yet reached any conclusions, but would

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discuss the issue with the Securities and Futures Commission after the

study. HKEx expected to issue a consultation paper by the end of the

year.

Penny stocks in Hong Kong generally refer to those small market

capitalisation and illiquid stocks.

Their prices are consistently trading at a few cents or below.

Examples include Skynet International Group and 401 Holdings.

The core businesses of most penny stock companies are so poor they are

unable to attract new investors, and in other markets they would be

delisted.

Nasdaq-listed companies are delisted if their stock prices fall below

US$1 (HK$7.80) for more than a month.

In China, the regulator will delist a company if it remains

unprofitable for three years in a row.

Unlike the United States and China, the local bourse does not have

delisting mechanisms for penny stocks.

Although a delisting mechanism may improve the quality of listed

companies, market players fear this would affect the holdings of small

investors.

"Many penny stocks are actually listing shells awaiting for some

white knights to show up," Tai Fook Securities' executive director

William Lee said. "Investors could hardly get their money out from

the company if it is delisted."

David Sun, chairman of the corporate governance committee with the

Hong Kong Society of Accountants, agreed.

"If a company is delisted, its minority shareholders may unload their

shares only if they wait until the company liquidates," he said.

fwong@hk-imail.com

All rights reserved.

END


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