Top shareholder of China’s troubled Zhongrong Trust plans to delist; stock surges

SHANGHAI (Reuters) -China’s Jingwei Textile Machinery Co – the biggest shareholder of troubled Zhongrong International Trust Co – saw its stock surge on Wednesday after offering to buy out investors who object to the firm’s plan to switch bourses.

The price of Jingwei stock, which resumed trade following a two-day halt, jumped the maximum 10% to 8.86 yuan ($1.22) after the firm said it would buy shares for 9.24 yuan each from holders who did not wish to carry them over to another exchange.

Jingwei owns 37.5% of Zhongrong International Trust which has missed payments on dozens of investment products since the end of July, investor sources said, triggering contagion fear in an economy suffering from huge debt in the real estate sector.

Delisting from the Shenzhen Stock Exchange could shield public market investors from liquidity woes at Zhongrong, a major shadow bank with heavy exposure to real estate.

“Due to changes in market conditions, the company’s operations face huge uncertainty that could have a major impact,” Jingwei said in an exchange filing late on Tuesday.

Under a proposal from parent China Hi-tech Group intended to “protect the interest of small shareholders”, Jingwei will withdraw its Shenzhen listing and seek to float on the New Third Board, a smaller equity trading venue in Beijing that has a high threshold for investor participation.

The proposal requires shareholder approval.

Asset manager Zhongzhi Enterprise Group, the second-biggest shareholder of Zhongrong International Trust, told investors at a videoed meeting this month that it is facing a liquidity crisis and will restructure debt.

($1 = 7.2869 Chinese yuan renminbi)

(Reporting by Shanghai newsroom; Editing by Muralikumar Anantharaman and Christopher Cushing)