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Chinese bourses introduce more stringent rules on stock trading suspensions

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Chinese bourses introduce more stringent rules on stock trading suspensions

The Shanghai and Shenzhen bourses tightened rules on stock trading suspensions, including cutting down on the number of reasons for which a trading halt is allowed.

Companies undergoing a major asset restructuring can now only be in a trading suspension for 10 days, the two Chinese stock exchanges said in separate Dec. 28 notices. Further, companies going through a change in control can only be in a trading halt for five days.

Companies conducting a reorganization due to bankruptcy reasons cannot suspend trading of their shares, as a general rule. In the event a trading halt is necessary for this reason, companies cannot suspend trading of their shares for more than five days.

Meanwhile, companies can no longer suspend their shares from trading if they are conducting an asset restructuring that does not involve the issuance of shares, a private placement of shares or an outbound investment, among others.

The bourses also instructed companies to strengthen their information disclosures regarding the suspension of share trading, including for when shares are suspended in the event of a share issuance to purchase assets.

In November, the China Securities Regulatory Commission had called on domestic stock exchanges to tighten rules on voluntary trading halts. The regulator had said bourses should reduce the amount of time stocks can stay suspended and should apply different limits on different reasons for the halts.

MSCI Inc. had previously said it was concerned about trading suspensions and capital mobility in China's stock markets, as the index compiler started including mainland-traded A-shares in MSCI indexes in May.