Delisting necessary: Kong

The Financial Supervisory Com-mission chief yesterday said that the government's proposed stock-market delisting policies were appropriate, as he fielded questions from industry veterans about the issue.

"We don't have an ideal system for managing listed companies at the moment ... [the proposed delisting mechanism] is the right direction to move in," the commission's chairman Kong Jaw-sheng (龔照勝) said at a luncheon with the Chinese National Federation of Industries (全國工業總會) yesterday.

The Cabinet-level commission is working on measures to oust so-called `penny stocks,' or shares that trade at low prices with low transaction volumes, in an effort to enhance the management of the nation's publicly listed companies.

The commission is scheduled to disclose details of the mechanism by the end of November, Jerry Huang (黃顯華), a commission member, said last month.

But several members of the Chinese National Federation of Industries yesterday expressed concern over the proposed mechanism, saying that it would not be fair to oust the penny stocks based simply on the conditions of low trading volume and share prices under the par share price of NT$10.

"The decisive factors should include a company's record of violations and the certified public accountants' reserved opinions about the firm's financial statements, which are the things that really matter," said Yeh Yi-hsiung (葉義雄), chairman of Taiwan Cotton Spinner's Association (棉紡公會).

Yeh, also chairman of Premier Microelectronics Development Corp (大將電子開發), said there are over 200 listed companies that could be categorized as penny stocks, with most of them in traditional industries.

While many companies in the traditional sector are working hard to improve their profitability, they are not as favored by investors as "red-hot" electronics stocks, Yeh said. Therefore, the government's proposed mechanism, if implemented, would simply overlook these companies' efforts, he added.

Premier Microelectronics was founded as a textile manufacturer in 1978 and transformed itself into a chip distributor in 2000. Premier shares grew by 0.91 percent to close at NT$5.55 on the Taiwan Stock Exchange.

In response, Kong said that the proposed system is not aimed at penny stocks, but rather at those companies angling to generate undue interest in the stock market via misleading information, behavior which in turn encumbers law-abiding listed companies.

"Unlike the US' mandatory delisting regulations, we would provide a secondary platform for those stocks removed from the main bourse," he added.

Kong said the commission would hold public hearings to communicate with all concerned parties before the policy is formally made.

Another industry veteran, Douglas Hsu (徐旭東), chairman of the Far Eastern Group (遠東集團) -- which owns Far Eastern International Bank (遠東商銀) -- called on the government to further relax regulations on banking services in China.

In response, Kong said he recognized the situation that local banks have lagged behind their clients in internationalization, and he is happy to encourage domestic banks to expand overseas.

However, when it comes to operations across the Taiwan Strait, it remains difficult to establish a platform for financial communication and supervision once the regulations regarding Taiwanese banks' operations China are liberalized, unless China's regulatory agencies demonstrate their goodwill, Kong said.