China’s securities regulator sought to allay market concerns regarding delisting risks on Thursday, stating that a near-term surge in delistings is not expected. The China Securities Regulatory Commission (CSRC) emphasized the gradual implementation of a “survival of the fittest” mechanism but assured investors of no imminent rise in delistings. Despite fears among investors and brokerages forecasting a record number of delistings, the CSRC aims to stabilize market sentiment.
Niu Chunbao, a fund manager at Wanji Asset Management, highlighted the diminishing efficacy of the strategy of chasing hot small-cap stocks under the current regulatory framework. Instead, he recommended focusing on blue-chip stocks. The small-cap CSI2000 Index experienced a 9% decline this week, contrasting with a 5% year-to-date rise in the blue-chip CSI300 Index.
Under the leadership of Chairman Wu Qing, the CSRC has pledged to regulate with “teeth and thorns” to restore confidence in the stock market. April’s reform measures, aimed at raising listing standards and eliminating “zombie companies” and “black sheep,” reflect this commitment. The CSRC revealed that nearly 100 China-listed companies have received the “ST” (special treatment) label this year, indicating delisting or other risks, but clarified that this number does not signify a significant increase compared to previous years. Additionally, the ST label can be removed if a company’s fundamentals improve.
Despite market turbulence, Zhang Kexing, general manager of Beijing Gelei Asset Management, emphasized the importance of investing in leading industry players to mitigate uncertainty. Retail investors like Lu Deyong, who previously profited from small-cap investments, are now shifting towards blue-chip stocks such as PetroChina and Kweichou Moutai, recognizing the risks associated with small-caps with poor fundamentals.
Overall, the CSRC’s efforts to provide reassurance and regulate the market reflect a proactive approach aimed at fostering stability and investor confidence amid evolving market dynamics.
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