The financial authorities' proposed mechanism to oust "penny stocks" was welcomed yesterday by some market players, but denounced by others as unwise.
"Penny stocks" is a term referring to securities with share prices or net worth lower than a certain level for a certain period of time.
"I believe the planning mechanism will have a positive impact on the local stock market in the long run," said Rocky Chiou (
The proposed move at least "will help investors reduce the risk of buying a money-losing stock, as companies with a poor bottom line will be forced out of the market," Chiou said.
On Monday, Jerry Huang (黃顯華), a member of the Cabinet-level Financial Supervisory Commission, announced that the commission is studying measures to oust penny stocks that show low transaction volume for a certain period of time. Details of the new mechanism will be made public by the end of November at the earliest, Huang said.
``We plan to follow the US in establishing a mechanism to allow investors to use their feet to vote,'' said Huang. ``If no one wants to buy such shares, we'll simply downgrade them or let them disappear. That will make our market healthier, more internationalized.''
Penny stocks may be first transferred to the smaller Gretai Stock Exchange, then delisted if there's no improvement in prices or volume, Huang said.
About 200 stocks, or about a tenth of the companies traded on the nation's bourses, will be affected by the planned mechanism if the commission starts to delist stocks traded lower than their par value of NT$10 (US$0.29) or below their net value for a period of time, Chiou said.
The delist mechanism will certainly incur immediate complaints from company executives and individual investors, as they will have to claim huge investment losses after their stocks are delisted, Chiou said.
Chien Hung-wen (
"The transaction values or the closing values of shares are not under control of companies, so the financial authorities should not use these values as a criterion for delisting or not," Chien told the Chinese-language Liberty Times in an interview.
"Instead, the delisting standard should take into account whether the prospective company's financial report is transparent or not, or if the company has been involved in any irregularity," Chien said.
The news was a blow to penny stocks on local bourses yesterday, with shares of Mosel Vitelic Inc (
Picvue Electronics Ltd (碧悠), which manufactures liquid-crystal displays, also dropped by the market's limit to NT$7.65, while textile company Hualon Corp (華隆), was down 7 percent at NT$1.08.
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