Defaults Rising For Companies on China's Third Board

China's Third Board may be the most free stock market in the world. The listing requirements are thin and there's little to no market making. Sell shares, and if people want to trade them, shares trade. If not, they don't trade.

China Money Network: The Astonishing Mysteries Of China's New Third Board
A total of 5,129 companies with combined market capitalization of RMB2.46 trillion (US$374 billion) were listed on China' New Third Board as of the end of 2015, up 3.26 times and 4.35 times from 2014, respectively, says China's Xinhua News Agency.

A total of RMB121 billion (US$18.4 billion) were raised in 2015, over nine times that of 2014. Institutional and individual investor accounts grew to 22,700 and 198,600, up nearly five times and 4.5 times from the year before, respectively.

But behind the boom, there are some confusing and disturbing undercurrents. Over half of the listed companies have not completed any trading of their shares, becoming the so-called zombie listed companies, says Chinese official media reports.

In some extreme cases, investor interests and basic regulations have been completely ignored, hampering the development of the exchange.

"The New Third Board is a dumping ground for Chinese garbage companies," commented one Chinese netizen.
A not so astonishing mystery is that companies are going bust there too, unable to pay their debt.

STCN: 雷区扩至新三板 信用债频现违约
In the last year, followed the "mined" "mine" model, based on an event of default of the bond market to get together again. March 21 evening, three new board listed companies to Nova announced that the company issued 2012 SME private placement bonds ( "bonds into 12") can not pay in full and on schedule. At the same time, China's bond defaults this year also showed a tendency to push the tie. According to the reporter's incomplete statistics, over the past three months there have been more than 10 defaults, a total value of nearly a billion yuan payment event occurred. In response, industry experts believe that China's bond market should change their ideas supervision, strengthen and build the letter Phi intermediary services, including the full range of risk management system.
The total figure includes some companies listed on the main exchanges and the Third Board companies are smaller, but it could really become a minefield due to the lack of transparency.

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