In the coming days, a new set of delisting regulations is set to come into effect in the Chinese stock market, a development anticipated to significantly reshape investment landscapesOften termed as the most stringent delisting rules to date, these regulations mark a substantial upgrade from previous delisting criteriaThe new framework categorizes delisting factors into four major categories: financial discrepancies, regulatory noncompliance, grave misconduct, and trading anomaliesThe comprehensive implementation signifies that A-share markets may witness an uptick in delisting rates, consequently increasing the likelihood of investors encountering delisted stocks, often referred to as 'stuck shares' or 'fallen angels.'

So, just how rigorous are these new delisting rules?

One of the most notable amendments involves lowering the threshold for companies that trigger delisting

This adjustment requires a deeper understanding and preparedness from publicly listed companies concerning these new norms.

To illustrate, let's consider a scenario under the previous regulationsIf a main board listed company reported a negative net profit coupled with revenue falling short of expectations, this would trigger financial delisting risksPreviously, the revenue threshold for loss-making companies was set at 100 million yuanIn essence, if a company had a net loss and revenue dipped below this 100 million yuan benchmark, it faced the risk of being delisted.

However, under the upcoming derisking regulations, this revenue threshold has now been elevated to 300 million yuanThus, a main board company now faces financial delisting risk if it posts a net profit loss alongside revenue that falls below the heightened threshold of 300 million yuan.

Moreover, beyond just revenue figures, if a company's recent accounting year sees its financial statements accompanied by an audit report that either expresses an inability to provide an opinion or issues a negative feedback, it will also activate financial delisting risks.

The implications of the new rules extend into other categories of delisting scenarios, particularly relating to trading characteristics, compliance regulations, and severe misconduct

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Each respective area has been equipped with stricter guidelines.

For example, for mandatory delisting due to trading issues, if a main board company’s market capitalization maintains a closing total value below 500 million yuan over 20 consecutive trading days, that company will trigger market capitalization delisting risksPreviously, the requirement for companies on the main board was set at 300 million yuan, which means the new rules have effectively raised the bar for maintaining listing status.

This elevation in bar is noteworthy when considering other exchanges like the STAR Market, the ChiNext, and the Beijing Stock Exchange, where the market capitalization delisting standard remains at 300 million yuanTherefore, the easing of delisting standards for the main board heightens the pressure on companies operating within that tier.

Given this new landscape, a critical question arises: should investors steer clear of stocks with small market caps? Generally, companies with a total market capitalization below 3 billion yuan are categorized as small-cap, while those below 2 billion yuan are classified as micro-cap stocks

Adhering to the newly established rules, a risk of delisting will loom over those with market caps dipping below the 500 million yuan markConsequently, investors must maintain a cautious outlook towards stocks with a total market valuation below 1 billion yuan.

For the STAR Market, ChiNext, and the Beijing Stock Exchange, the framework exists whereby a stock can face delisting if its closing market capitalization remains under 300 million yuan over a series of 20 trading daysAlthough the conditions for delisting in these areas appear more relaxed, it’s vital to recognize the nature of these companies as often being new ventures or serving high-growth sectors, lending a higher propensity for such enterprises to meet the delisting criteria.

Thus, any company with a total market capitalization below 1 billion yuan is indeed at a heightened risk of facing delistingInvestors should not adopt a mindset of complacency when considering such stocks, breaking away from the notion of 'it won’t happen to me.' With the backdrop of these new regulations, the ramifications for micro-cap stocks could be severe.

The rollout of these delisting regulations may lead speculators to divert funds towards more stable investments like blue-chip or white-horse stocks