Action against firm for falsifying production and inspection records

ST Changsheng, a vaccine maker suspected of market malpractice, said it has been asked to delist by the Shenzhen Stock Exchange on Tuesday.

Analysts said the development is a sign that the nation's securities regulator is committed to tight supervision of underperforming listed companies and to strict implementation of delisting rules.

There has been speculation that the company might face a delisting penalty too. But, on Tuesday, the company merely said it received a notification about delisting from the bourse.

The company has been found to engage in falsifying production and inspection records in the making of vaccines, triggering widespread public anger and concern.

Gao Junfang, ST Changsheng's chairwoman, and three other senior managers will be barred from China's securities markets for life due to market violations, according to the China Securities Regulatory Commission, the nation's top securities regulator.

Trading of its shares halted on Nov 19, after hot money chased the shares, lifting them by the daily limit for days on end. The company's shares were last traded on Nov 16 and closed at 3.94 yuan, up 5.07 percent.

The regulator has tagged the company as a Special Treatment case, implying the company has poor fundamentals.

Yan Qingmin, vice-president of the CSRC, said some progress has been made in efforts to improve the quality of listed companies and protect investor interest.

A number of underperforming listed companies, including ST Changsheng, have been forced to delist this year, as the latest delisting regulations took effect.

As part of efforts to improve regulation, the government revised rules earlier this year, adding fresh terms and conditions for delisting scenarios. One of them has been invoked to make the delisting a specific response to the vaccine maker's conduct in the stock market.

In the latest version of delisting rules, listed companies found to be falsifying records or failing to disclose important information or harming public health and public safety will be forced to delist, according to separate announcements made by the Shanghai and Shenzhen stock exchanges.

In October, the CSRC had imposed a fine of 600,000 yuan ($86,500) on Changsheng.

The China Food and Drug Administration also said it had imposed penalties on the company, including a fine of 9.1 billion yuan, besides banning 14 of its executives from working in the industry again.

Market insiders said strict implementation of delisting rules is a promising sign of further reforms in the A-share market.

Strategists with Chongyang Investment wrote in a report that an effective delisting framework would provide incentives for suspended issuers to act promptly towards resumption, and would help address the problem of prolonged suspension of trading in issuers' listed securities.

For long, China's stock markets have been dominated by speculation-prone individual investors, resulting in high volatility.

Since the first delisting in 2001, the A-share market has seen only 57 firms delist despite a reform of rules in 2014, according to Wind, an information service provider.