MSCI warns Chinese companies this will get them dropped from the emerging markets index

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In an extreme case, trading in shares of Xinjiang Yilu Wanyuan Industrial Investment, a loss-making ceramic products maker, has been suspended for about 20 months.
"The issue is that in a freely accessible market, investors want to be able to get in and get out.
If a market falls, they still want to be able to get out," said Chia.
"But if you suspend, investors cannot get out, that will be a problem.
" Seasoned foreign investors in China`s A-share market concur.
"You can tolerate losing money, but you cannot tolerate not being able to trade," said Anthony Cragg, a senior portfolio manager at Wells Fargo Asset Management who manages $2.
2 billion in several funds - including one dedicated to China.
Exploiting loopholes The rules announced last year specify that in the case of a private share placement, suspension time on the Shanghai stock exchange cannot exceed one month.
The Shenzhen stock exchange stipulates a maximum of six months for a trading suspension in the event of a company restructuring.
Yet, plenty of companies, particularly smaller companies, are able to exploit these relatively loose suspension rules.
This month, when China`s start-up board ChiNext tumbled to 2-1/2-year lows, companies listed there — including H and R Century Union Corp.
, Xinlong Holding Group Co.
and Galaxy Biomedical Investment — quickly suspended share trading, citing various reasons, ranging from margin calls to restructuring, or waiting for the release of price-sensitive information.
Xu Caiyuan, a prominent activist investor, said many Chinese companies were "playing dead" to avoid price falls, so that major shareholders facing margin calls could maintain control by "trapping small investors.

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