China Ocean Resources faces market delistingChina Ocean Resources, a Hong Kong-based deep-sea fisheries company, is on the verge of being delisted from the Korean stock market due to its false financial disclosures.
If China Ocean Resources is dropped, it will become the latest Chinese firm booted from the bourse after grappling with lower valuations and a lack of investor confidence. A total of 22 Chinese companies have been allowed to trade their shares on the Korean market since 2007, but seven have been delisted.
Investor confidence toward locally listed Chinese shares plunged after China Gaoxian Fibre Fabric, a Chinese textile company, was expelled in 2011 just months after listing on Kosdaq over dubious accounting practices.
Following the fiasco that led to a spate of lawsuits by angry Korean investors, several Chinese firms on the Seoul bourse were hit hard.
China’s United Technology Holdings was ousted from the local bourse in 2012 after failing to comply with regulatory conditions. 3Nod Digital and China Food Packaging - voluntarily dropped their listings in 2013.
The negative sentiment, coupled with tighter reviews by the Korea Exchange, dried up initial public offerings by foreign companies.
Foreign firms listed on the local bourse have some legal blind spots because they don’t need to abide by Korean regulations on external audits.
Hwang Se-woon, a senior researcher at the Korea Capital Market Institute, said foreign companies can’t be reprimanded by Korean laws.
Poorly performing foreign firms must be screened during the process of listing, but such efforts are still “insufficient,” Hwang said.