Iron fist on listed firms heartens investors

Drastic moves to crack down on the misconduct of listed companies were applauded by investors in cyberspace as a crucial step to clean the market environment.

The China Securities Regulatory Commission on Friday reported the ongoing investigations of eight listed firms for misconduct that violated regulations on information disclosure.

Their violations include failing to disclose connected transactions with clients, exaggerating sales revenue and failing to timely reveal major corporate events, the CSRC said in a statement.

The statement said the commission will strictly crack down on those violations to protect the legitimate interests of investors.

At a press conference Friday, the CSRC said it was investigating Minsheng Securities and Nanjing Securities for not diligently fulfilling their due responsibilities as initial public offering underwriters.

New IPO application materials filed by those two brokerage companies would not be accepted by the commission during the investigations.

The probes followed the commission's severe punishment of Ping An Securities, a leading broker in China, for failing to fulfill its duties in sponsoring a company's fraudulent IPO.

Hunan-based Wanfu Biotechnology Agricultural Development Co, listed in Shenzhen in 2011 with the sponsoring of Ping An, was found to have inflated its revenues and net profits from 2008 to 2011 to get the IPO qualification.

On May 10, the CSRC suspended Ping An's IPO sponsorship license for three months, confiscated the 25.55 million yuan ($4.12 million) of sponsoring fee collected from Wanfu and imposed a penalty of twice that amount.

The iron fist of the commission towards listed companies and IPO sponsors gained immediate attention from experts and investors, lauding the moves as a necessary approach to clean up the market environment and protect investors.

On China's most popular microblogging service Sina Weibo, the CSRC's moves attracted thousands of postings and comments, mostly positive about the long-term effects of the strict supervision.

"This is absolutely bad news for small and medium-sized listed companies with high price-earning ratios and involved in fraudulent practices, but good news for blue chips and for the healthy development of the A-share market," a Weibo user with the screen name of HJ-MRPX said.

In a posting, Li Daxiao, an analyst with Yingda Securities, described the commission's action as "major good news" that will benefit China's stock market in both the short and the long term.

If the regulator can take effective measures, it can truly come to the rescue of the country's stock market and investors, Li said.

Niuyanniuren, another user of Sina, commented after a piece of reporting that cleaning the market environment is crucial for both nurturing the notion of rational investment and raising investors' confidence in the stock market.

"The authority must severely punish the fraudulent companies and give investors reasonable compensation," the contributor said.

However, not all netizens were optimistic.

A Weibo user nicknamed Qinglingl said that strict supervision of listed companies is progress, but it is only a start.

"The stock market can only gradually become regulated after the commission's moves, and it will be like walking through a field of land mines in the near future," Qinglingl said.

Some others hoped for more thorough investigation from the commission and making it a long-lasting move in pursuing a clean and equitable market environment.

Partly due to the positive sentiment on the market, Chinese shares closed higher Monday, with the benchmark Shanghai Composite Index up 0.75 percent to end at 2,299.99, the highest level since March 27.