The Risk of Stock Pledges of SZSE-listed Companies Is Generally Controllable

The Risk of Stock Pledges of SZSE-listed Companies Is Generally Controllable

The FINANCIAL -- SZSE pays great attention to the risk of stock pledges of SZSE-listed companies, and makes full use of scientific and technological supervision measures to build a platform for monitoring the risk of stock pledges, timely grasp the situation of shareholder stock pledges, and urge relevant shareholders to duly disclose information and forecast and resolve risks to effectively maintain the stable operation of the market.

 The stock market is increasingly volatile recently. The risk of stock pledges raises considerable concern from the market. SZSE has comprehensively sort out, screened and prevented relevant risks. Statistics show that the risk of liquidating pledged stocks of SZSE-listed companies is generally controllable. As of now, the average performance guarantee ratio of pledged securities in the SZSE market (weighted average of the pledged market capitalization) is 223%. The market value of stock pledges below the closing line accounts for less than 2% of the total market capitalization in the SZSE. Considering factors such as judicial freezes, restrictions on stock sales and reduction of holdings, the proportion of the stocks pledged which can be directly closed out in the secondary market is even lower.

Judging from individual stocks, a small number of listed company shareholders have insufficient assessment of their own capital strength, with a lack of awareness of risk prevention and a high proportion of shares pledged. These listed companies have relatively prominent risks. With the increase of market volatility, the above-mentioned shareholders have limited ability to cover their positions. For such contracts, the financial lenders will gradually resolve the risks within a certain period of time mainly through negotiation with the borrowers and through various methods such as contract extension and supplementary guarantees. In the event that there is indeed a need for actions against a breach of contract, the amount of direct reduction from the secondary market will be relatively limited due to factors such as the share reduction requirements. According to statistics, the cumulative amount of defaults in the secondary market in the SZSE in 2017 was approximately CNY700 million. The balance of the daily default treatment was approximately one ten-thousandth of the balance of the financing that triggered the default. Last week, the actual daily default disposal of stock pledge financing in the SZSE was about 30 million yuan, with no significant change.

For the risk of stock pledges exposed recently, SZSE will further standardize the information disclosure of high stock pledges and strengthen the regulation of stockholders' pledge of shares. First, SZSE shall improve the differentiated disclosure requirements at different categories and levels, and strengthen the risk disclosure of high proportion pledges of shareholders; Second, SZSE shall strengthen the daily supervision of the behavior of stock pledges, pay close attention to the high proportion of pledges of controlling shareholders or the largest shareholder of listed companies, strengthen transparent disclosure, and urge them to conduct risk disclosure and pre-research; Third, SZSE shall continue to urge securities companies and other financing parties to increase coordination with pledgers, to make risk preplans in advance, and provide necessary extensions and other support to the normally operating parties in temporary financial difficulties.