* Tsann Kuen says Zhangzhou govt studying how to support
* B-shares no longer only way foreigners to buy shares in
* Local governments have stepped in to support several
By Pete Sweeney
SHANGHAI, Aug 14 Tsann Kuen (China) Enterprise
Co Ltd, the first company at risk of ejection from
China's troubled B-share board after regulators tightened
delisting rules, said on Tuesday that a local government is
considering steps to support one of its main subsidiaries.
Tsann Kuen, a small household electronics manufacturer based
in Xiamen in the southeast province of Fujian, caused a panic in
China's B-share market late last month when it announced it was
at risk of being forcibly delisted for failing to meet a new 1
yuan "par value" standard for B-share prices.
In a statement published on the Shenzhen stock exchange's
website on Tuesday, Tsann Kuen said the local government in
Fujian's Zhangzhou city has established a working group to study
how to support the company's operations in the city, given the
impact a delisting by the parent would potentially have on the
"The local government hopes it can provide appropriate help
and support to Zhangzhou Tsann Kuen at the right time."
The company suspended trading in its shares on August 2
after spending 18 days trading below par, two days before the
delisting rule would have automatically kicked in.
B shares are shares in Chinese companies denominated in U.S.
or Hong Kong dollars which can be bought and sold by both
Chinese citizens and foreigners. Once the only way foreigners
could buy shares in Chinese companies, the market for B shares
has since been rendered largely irrelevant by reforms allowing
Chinese companies to list abroad.
The Zhangzhou government's public relations office did not
answer calls from Reuters to confirm that it was considering
ways to help. But if that help is forthcoming it would be
postive for the parent company's prospects, according to
Cao Xuefeng, analyst at Huaxi Securities in Chengdu.
"If a local government supports a subsidiary's development,
that indicates positive prospects for the company as a whole."
In addition to its headquarters in Xiamen, Tsann Kuen has
eight subsidiaries in China, but the three entities in the city
of Zhangzhou make up the bulk of the company's assets.
Tsann Kuenn's shareholdings in Zhangzhou have a total value
of 124 million yuan, representing 75 percent of the value of the
parent's total subsidiary shares.
Local governments in China have a track record of moving in
to keep favored local employers out of trouble.
For example, a technically insolvent textile company
Shandong Helon was saved from default on 400 million
yuan in commercial paper by a last minute bailout from the local
government of Weifang city.
Similarly, the government of Xinyu city, in Jiangxi
province, announced it would use taxpayer funds to repay the
loans of LDK Solar, a U.S.-listed solar equipment
However, the Tsann Kuen case is slightly different in that
analysts say the company could avoid delisting without any
bailout by executing a reverse stock split that would push its
share value back above the regulatory minimum.
In addition, while the company admitted to posting a loss in
the first half of the 2012 in the statement, the delisting
threat is unrelated to its financial condition and the company
is not facing imminent bankruptcy.
Cao of Huaxi Securities said Tsann Kuen managers were likely
to be considering whether it is worth maintaining their B share
ticker at all.
"I don't think staying on the B-share board does much for
their interests. It's not as good as delisting from the B shares
and relisting on the A-share market."
(Editing by Simon Cameron-Moore)