Suspension of trading

The purpose of suspension is to ensure a fair and orderly market, so that trading in a particular stock is undertaken on a fully informed basis and to avoid any uneven information dissemination and opportunities for insider dealing. Generally speaking, a suspension will occur if:

• the company is about to release an announcement on price-sensitive information;
• there are material corporate activities, such as contemplating a rights issue or arranging a placement;
• there are fundamental concerns about the company's suitability for continued listing and / or trading, such as liquidation, cessation of operation or involvement in material litigations or investigations;
• there are unusual movements in the price or trading volume of the stocks which may be caused by uneven dissemination or leaks in price sensitive information in the market; or if there are deliberate market manipulation activities; or
• the Stock Exchange of Hong Kong (SEHK) is of the view that a listed company has seriously breached the Listing Rules, e.g. the listed company is unable to meet its obligation to periodically disclose its financial information.

Suspension can be initiated by the listed company itself or by the market regulators, the SEHK and the SFC. Usually, suspensions initiated by listed companies involve material corporate activities, while a suspension initiated by regulators may be in relation to untoward movements in price or trading volume. A listed company which intends to suspend trading of its shares should apply to the SEHK with specified reasons.

It depends but the SEHK can delist an issuer after a trading suspension of 18 and 12 continuous months for Main Board and GEM issuers respectively. For a temporary suspension related to corporate activities, trading will usually resume once a proper announcement has been made. In the event of great concerns, such as liquidation and material litigations, the suspension might be much longer. The continuation of a suspension for a prolonged period without appropriate measures being taken to resume trading may eventually lead to delisting.

If investors encounter stock suspension, they should keep an eye on the latest announcements concerning the progress or resumption of trading for the listed company concerned in newspapers or on the HKEX website. For most stocks which have been suspended for more than three months, you can check the HKEX's Prolonged Suspension Status Report, which carries details of the date of suspension, the reasons for suspension and the current status.

Investors can be caught out by unexpected halts in trading. If a stock is suspended after it has been purchased, the investors will not be able to sell in the market, but will still have to pay for the stock.