Chinese companies listed on South Korea’s main and secondary stock markets are struggling to stay afloat as they are faced with a string of audit reporting issues, sending an alert to investors.

According to the country’s sole stock exchange operator Korea Exchange (KRX), on Sunday, China Great Star International Ltd., a holding company engaged in the management of retail and manufacturing entities, received a disclaimer of opinion from its auditor for its 2018 financial statement last week, increasing delisting risk. The company’s shares were suspended from trading on April 19 to protect investors, KRX said.

A final decision will be made on the fate of the company after it raises an objection that will be reviewed by the exchange operator. Concerns, meanwhile, have been mounting among investors over the company’s delisting.

East Asia Holdings Investment Ltd., another China-based company listed in the Kosdaq, also faced stock trading suspension last week after it has not yet appointed an external auditor, raising the possibility for the company to fail in submitting an auditor report by the April 22 deadline. If it fails, it will be kicked out of the Korean stock market.

Chinese companies rushed to make inroads into Korea’s stock bourses in the late 2000s. Over the years, however, industry insiders noted that listed Chinese companies have become notorious for hitting a big blow to investors due to violation of auditing regulation, and many of them have been expelled from the bourses. The KRX is also blamed for its poor listing qualification review process.

So far, 11 Chinese companies have been delisted from the Korean stock market after receiving a disclaimer of opinion, including China Ocean Resources, Shenglong Solar, and China Gaoxian Fibre Fabric Holdings. China Haoran Recycling that was on watch-list was forced out after not being able to submit its quarterly report before the deadline. Cowelleholdings and Wayport voluntarily applied for departure.

By Chung Hee-young and Lee Eun-joo

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]