More than half of all listed Chinese companies have suspended their own shares as Beijing struggles to contain a massive stock rout.
At least 1,430 of the 2,800 companies traded in China have elected to pull their shares as markets continue their crazy roller-coaster ride, according to state media.
The number keeps ticking upward — on Wednesday morning alone, hundreds of firms announced a halt in trading, according to a review of stock exchange filings.
Companies — particularly small and medium-sized firms — are clearly nervous about taking a nasty hit due to recent market fluctuations.
Zhejiang Great Southeast, a plastics manufacturer traded in Shenzhen, suspended its shares on Tuesday, due to “the uncertainty of the situation, and in order to avoid unusual stock price volatility and to safeguard the interests of investors.”
Another firm, Hangzhou First PV Material, a solar company listed in Shanghai, halted trading Wednesday to avoid abnormal market fluctuations from killing its shares, according to a company filing.
Company shares can be suspended for months, even years — all subject to regulatory approval. While firms doing this now may find some defense against volatility, it’s possible that they are only delaying the inevitable.
Once the stocks resumes trading, they will again be subject to a daily trading limit on the Chinese market. Circuit breakers kick in to stop trading if shares go up or down by 10% — that means falling in line with the rest of the market could take a while.
Stocks in Shanghai have dropped more than 30% since its June 12 peak after reaching incredible highs. At one point this year, the benchmark Shanghai Composite had jumped about 60%, while the smaller Shenzhen Composite surged over 100%, putting total market cap in China at around $10 trillion.
But then the bottom fell out. Chinese stocks have now lost more than $3 trillion in value, and the swings are enough to give both investors and companies vertigo.
The central government has pulled out all the stops to stabilize markets, but its efforts seem to have had little effect — markets remain extremely volatile.
Investors are also starting to rein in their positions — margin trading, the practice of investing on borrowed funds, had exploded in recent months, helping to fuel the market’s rise.
Over the last 10 trading days, however, about 500 billion yuan ($81 billion) has been pulled out margin financing, which is down 30% from its peak, according to Steve Wang, chief China economist at Reorient.