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On November 13, SZSE spokesperson answered questions from reporters on the issues of recent market concerns.
1. Q: Today, the results of the first round of China-Canada Economic and Financial Strategic Dialogue show that both China and Canada support SZSE and the Toronto Stock Exchange Group (TSE) to explore the establishment of a cross-border financing mechanism for China-Canada innovative companies and explore product innovation cooperation. Please brief us on it.
A: SZSE and TSE have a strategic fit in providing capital market services for small and medium-sized innovative companies. The two parties have held high-level talks, discussed thoroughly and reached a broad consensus on issues concerning the cultivation of technological and innovative companies and the match-making of cross-border capital. Both parties agree to leverage existing resource channels, build a cooperation network, promote in-depth development of China-Canada technological and innovative resources, as well as jointly explore and establish a cross-border investment and financing mechanisms for China-Canada innovative companies to give full play to the role of financial support for the real economy and lay a more solid foundation for the cooperation between the two countries. Next, focusing on the theme of venture and innovation, the two sides will explore the demonstration of China-Canada technological and innovative companies in the each other’s market, conduct research on innovative index cooperation and cross-border product development, enrich and improve the cross-border product connectivity innovation mechanism, and promote the participation of professional intermediaries in China-Canada cross-border capital services, so that we can provide a full range of services for cross-border investment and financing.
2. Q: What regulatory measures has SZSE adopted for the abnormal trading of stocks such as Hengli Group and *ST Changsheng Bio-technology?
A: Recently, the stock price fluctuations of Hengli Group and *ST Changsheng Bio-technology have been abnormal. Their respective cumulative stock prices increased significantly, seriously deviating from the corporate fundamentals. In this regard, SZSE pays particular attention and monitors closely, scrutinizes on a daily basis, and issues letters of concern to urge relevant companies to strengthen risk disclosure.
The first is to strengthen the information disclosure of listed companies and reveal the investment risks in the secondary market. As of now, Hengli Group has hit the criterion of abnormal fluctuations in transactions for five times consecutively. In accordance with the relevant provisions of the Rules Governing Share Listing, SZSE urged the board of directors of Hengli Group to comprehensively inspect whether the company and important shareholders withhold information that should be disclosed, whether there are major events under planning, whether the company's operations are normal, and whether the internal and external operating environments have undergone major changes, to fully disclose the actual business situation in the relevant verification announcements, and to reveal the risks associated with the stock price fluctuation. According to the company's information disclosure, in the first three quarters of 2018, Hengli Group’s net profit was a loss of CNY5.153 million after deducting non-recurring gains and losses, and its recent operating condition has yet been improved significantly. As of November 13, Hengli Group’s P/E ratio was close to 2,800 times, and the recent secondary market growth of the company's stock seriously deviated from the company's fundamentals. This indicates an obvious risk of secondary market speculation. As for *ST Changsheng Bio-technology, its stock has touched the upper circuit for four consecutive days since November 8. SZSE urged it to prominently re-announce the following issues: the company's failure to disclose the semi-annual report within the statutory time limit; its major issues such as the receipt of administrative penalty of huge fines from the State Drug Administration and Jilin Provincial Food and Drug Administration, the receipt of administrative penalty decision letter and the CSRC's prior notice of market entry ban; the risks of listing suspension or delisting caused by the aforesaid major issues; and such major risks as that its performance would be greatly influenced due to its subsidiary Changchun Changsheng’s supplementary payment of corporate income tax and late payment fees for the disqualification of high-tech enterprises.
The second is to strengthen real-time monitoring of abnormal trading to maintain normal market order. SZSE has focused on the real-time monitoring of unusual share price fluctuations of Hengli Industrial and *ST Changsheng Bio-technology, closely monitored the public opinions on them, and timely checked their stock trading. Besides, SZSE has further strengthened trading information disclosure, and alerted investors to raise risk awareness and rationally participate in market trading. In terms of trading, during the recent period of continuous price rise of Hengli Industrial and *ST Changsheng Bio-technology, their trading was dominated by individual investors. Speculation was obvious since their buying individual investors covered more than 97%, while the selling also covered more than 90%. Hot money and institutional investors were speculative and small and medium-sized retail investors followed suit. The trading came high on the list. But the share holding time was short, with an average of 1-2 days. Short-term trading was obvious.
SZSE has earnestly fulfilled its first-line supervision duties, continued to pay attention to the 2 companies' information disclosure and stock trading. We severely crack down on various violations of the law, such as manipulating the market and insider trading, so as to maintain the normal trading order of the capital market and protect the legitimate rights and interests of investors. We solemnly remind investors to make careful decisions and rational investment, and prevent risks.
3. Q: What reform and development measures has SZSE recently taken?
A: SZSE resolutely implements the guiding principles from General Secretary Xi Jinping's relevant important speech and a series of guidelines and policies of the central government on economic and financial work. In accordance with CSRC's requirements, we insist on serving the real economy, preventing and resolving major risks, maintaining stable market operation, and promoting the reform and development of the market in an orderly manner.
First, we earnestly put into practice the guiding principles from General Secretary Xi Jinping's important speech at the private enterprise conference. General Secretary Xi Jinping's important speech fully affirms the important position and role of private economy, responds to the concerns of private enterprises on their development from the perspective of theory and practice, greatly encourages them, boosts the confidence of market development, and points out the directions for our risk preventing and resolving, and supervision. We give full play to SZSE's characteristics and advantages in serving private enterprises, innovative enterprises, and SMEs, strive to help enterprises solve financing problems and expand the financing channels for private enterprises through multi-tiered equity markets and various debt investing and financing tools. SZSE also accelerates the revision of supporting rules for share repurchase to support qualified listed companies to repurchase shares according to law, promotes M&A restructuring marketization reform, standardizes information disclosure and enhances transparency so as to effectively improve the quality of listed companies. We support the issuance of special bailout bonds and build a risk-sharing operation mechanism through a market-oriented way to help private listed companies resolve the risks of equity pledge. Besides, we conduct the pilot of credit protection tools in SZSE to enhance the bond financing efficiency for private enterprises. The development of the private economy is related to the stable development of multi-tiered capital market reforms. SZSE will strengthen market visits and investigations to understand the facts of the frontline, and continue to serve private enterprises with multiple measures, in order to provide strong support for the healthy development of the private economy.
Second, we continue to promote the work related to market reform and development. SZSE has been working in accordance with relevant arrangements to research and promote the deepening of ChiNext reform so as to further enhance its inclusiveness and coverage, and increase the support towards the listing of technological and innovative enterprises. Meanwhile, we continue to optimize the multi-tiered equity market system and mechanism, promote the coordinated development of various boards and better meet the diversified financing needs of enterprises.
Third, we further promote a high level of opening up. In accordance with CSRC's unified deployment, we actively integrate into the national overall opening-up strategy, vigorously serve the "Belt and Road" construction, strengthen cross-border capital market cooperation, and promote the construction of a wider, higher-level, and deeper inter-connectivity mechanism. Besides, we strategically invest in Pakistan Stock Exchange and Dhaka Stock Exchange of Bangladesh to explore the promotion of pragmatic and sustainable infrastructure cooperation and promote the realization of technology and capability output between exchanges. In addition, we deepen cooperation with London Stock Exchange Group and Toronto Stock Exchange Group to innovate in cross-border financing mechanisms for enterprises, promote the construction of innovative venture investing and financing service platforms, vigorously promote cross-border financial service innovation for technology enterprises and SMEs and strive to build a world-leading innovation capital formation center.
