By MarketWatch
SHANGHAI–Shares of two Chinese small firms that went public last week will be suspended from trading from Monday after their recent rallies triggered relevant exchange trading rules, the two firms said.
The two firms, which floated shares on the ChiNext board, a marketplace for start-up firms on the Shenzhen Stock Exchange, each said in filings to the bourse that their shares will be halted from trading from Jan. 27. The Shenzhen bourse has a mainboard and two smaller boards.
The two companies–drug company Zhejiang Wolwo Bio-Pharmaceutical Co. (300357.SZ) and machinery company Chengdu Tianbao Heavy Industry (300362.SZ) — each said they will start an inspection into whether their shareholders and controllers as well as the companies themselves had already disclosed all major events that should be disclosed following recent “abnormal fluctuations’ in their shares. The inspection is aimed at protecting investors’ interests.
Shares of the two companies will resume trading after the inspection, they said, but didn’t provide a timeframe.
Under current trading rules, if the accumulated rise or fall of a stock in three straight sessions is 20% above or below that of its comparable index, the move will be regarded as “abnormal fluctuations’ by the exchange which could trigger a suspension of the trading of the stock.
Over the previous three sessions, Zhejiang Wolwo rose 33% while Chengdu Tianbao added 28%, compared with a 5% rise in the benchmark ChiNext Composite Index, a gauge of all stocks trading on the board.
China’s regulator has given the go-ahead to around 50 companies to float shares following overhauls aimed at making China’s initial public offering system more market-focused.
27 of the 50 companies have already floated their shares on the exchanges in Shanghai and Shenzhen, with almost all of them getting warm receptions from investors, who haven’t seen any listings for over a year due to the moratorium imposed on the country’s IPO market.
Among the newly-listed stocks, Zhejiang Wolwo is the best performer, followed by Chengdu Tianbao. Zhejiang Wolwo was last at CNY38.81, up 94% from its IPO price of CNY20.05 and Chengdu Tianbao was at CNY22.30, 86% above its IPO price of CNY12.00.
Both Zhejiang Wolwo and Chengdu Tianbao made a strong debut on Tuesday, thanks to pent-up demand for new listings.
China stopped approving IPOs in November 2012 as part of Beijing’s effort to boost confidence among investors who had seen stock prices slide for years. The freeze gave regulators time to overhaul a market in which many new deals had been overpriced in the primary market and subsequently took long falls.
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