Hong Kong Market Reconsiders Plan
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HONG KONG (AP) _ Financial Secretary Antony Leung criticized the Hong Kong Stock Exchange on Monday for acting too hastily in announcing plans to tighten share-listing requirements _ throwing so-called penny stocks into a tailspin.
The exchange backtracked over the weekend on its proposal to delist companies whose shares fell below 50 Hong Kong cents (6.4 U.S. cents) for 30 consecutive days, saying it would reconsider the plan and issue a new one in October.
But Leung told reporters the exchange did not consult with the government and had not thought through the consequences of announcing the plan _ released as a ``consultation paper″ _ amid the global stock market turmoil.
After the announcement late last week, panicked investors dumped the low-priced ``penny stocks,″ which account for nearly half the 791 companies listed on Hong Kong’s main board.
``I hope they will review this and in the future do a bit better,″ Leung said.
Local media carried scathing criticisms of the plan, but applauded the exchange’s effort to improve the quality of listed companies, amid prevailing worries over corporate governance and accounting.
``Who in his right mind would bother with such a consultation document when world markets are so volatile?″ asked the English-language newspaper The Standard.
Hong Kong stocks slumped Friday, with the key Hang Seng Index falling 1.13 percent to a 10-month low of 9,773.12. The index recovered that lost ground Monday, surging 2.08 percent, or 202.87 points, to 9,975.99.
Some penny stocks were still lower.
A group of 72 penny stock companies, as well as the staff union of the market watchdog, the Securities and Futures Commission, placed a full-page advertisement condemning the plan in the Hong Kong Economic Journal.
``We can’t help but be furious at this illogical, unfair and discriminatory treatment of second- and third-tier listed companies,″ the ad said.
Angry investors flooded radio talk shows with calls, some weeping with frustration over their losses.
Exchange officials announced Sunday they planned to delay the plan to tighten listing requirements until it can be studied further.
Charles Lee, chairman of Hong Kong Exchanges and Clearing Ltd., told reporters last week’s sell-off resulted from confusion over the plan, which also stipulated that if a company’s value dropped below 30 million Hong Kong dollars ($3.8 million) for 30 consecutive days, it could be delisted.
Lee said Sunday the exchange will publish a supplementary document on the proposed listing rules, which will be open for public consultation, at the end of October.
He said the exchange would also consider setting up an over-the-counter market to allow investors to trade shares of delisted companies _ responding to investors’ fears that there would be no such escape mechanism.
Currently, a company must be profitable for three years before it can list. The exchange said last week that it now also wants companies to show a market capitalization of 200 million Hong Kong dollars ($25.6 million) _ twice the current level _ before they can list.
On the Net:
Hong Kong Stock Exchange: http://www.hkex.com.hk