The largest shareholder of the Chinese trust firm at the heart of the country’s shadow banking crisis plans to delist its shares due to “significant uncertainties,” raising more concerns about financial contagion in the $18 trillion economy.
(Bloomberg) — The largest shareholder of the Chinese trust firm at the heart of the country’s shadow banking crisis plans to delist its shares due to “significant uncertainties,” raising more concerns about financial contagion in the $18 trillion economy.
Jingwei Textile Machinery Co. said in a filing Tuesday it plans to pull its shares from the Shenzhen stock exchange, a rare move by a central government-backed enterprise. The company also cited “market changes” for the move, aimed at protecting the interests of smaller shareholders.
While the firm made no reference to Zhongrong International Trust Co., Jingwei ranked as the top shareholder of the embattled shadow bank with a 37.5% stake, according to Zhongrong’s annual report for 2022. Zhongzhi Enterprise Group Co., one of China’s largest private wealth managers, ranked second.
“Listed companies are under global scrutiny, which is not helpful when operations are failing,” said Andrew Collier, managing director at Orient Capital Research, adding the delisting is most likely related to Zhongrong.
China’s $2.9 trillion trust industry is emerging as the latest threat to the world’s second- largest economy, as the sector faces another round of losses that Goldman Sachs Group Inc. analysts say may swell to $38 billion.
Read more: China’s Hidden Financial Dangers Erupt With Shadow Bank Crisis
Zhongrong, which has been a major backer of troubled real estate developers, has missed payments on dozens of investment products and has said it has no immediate plans to make clients whole. The firm has 270 high-yield products totaling 39.5 billion yuan ($5.4 billion) due this year, according to data provider Use Trust.
Jingwei Textile said it risks delaying the release of its first-half earnings due on Aug. 31, according to a separate statement, among more than a dozen exchange filings. Shares will be suspended from trading on Sept. 1 in that case, it added.
The company plans to resume trading Wednesday after a two-day halt. The stock has fallen 20% this year, compared with a 2.1% decline in the benchmark CSI 300 index. The company has a market value of 4.21 billion yuan.
Jingwei said Tuesday it will hold an extraordinary general meeting on Sept. 15 for shareholders to vote on its delisting plan. The firm doesn’t plan to relist its shares, which will be traded on the National Equities Exchange and Quotations instead, according to a statement.
–With assistance from Li Liu.
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