Administrators with both bourses in Shanghai and Shenzhen, south China's Guangdong province, said they issued on Friday a circular on problems concerning improving the risk warning system based on firms which may face the penalties of being banned from further trading.

The administrative authorities with the two bourses said the risk warning system for trading bans was designed to inform investors at any time of the danger of certain corporate shares which might be halted, and to promote stable growth of the securities market.

An official with Shanghai Securities Exchange held that the share trading ban warning system would be of great significance to preventing investment and market risks, and smooth the execution of trading bans.

"The risk warning system will on the one hand remind investors of heeding investment risk, and on the other hand, also remind listed companies and chief share-holders to be fully aware of impending penalties and will help them make active efforts to make profits and avoid being banned from trading by improving their financial status," said the official.

According to the circular, companies mostly likely to get warnings include: those which have incurred losses over two straight years; companies whose financial accounting reports have been found to contain major errors or frauds and have incurred losses despite corrections; companies whose financial accounting reports have been found to contain major errors or frauds, but refused to correct them within deadlines; and companies which failto release annual or mid-year reports.

Once warned, listed companies will bear the "*ST" mark before their traded shares, and the daily rises of such shares will be limited to 5 percent from the opening prices.

Ten companies have stopped trading their shares at bourses in Shanghai and Shenzhen since the China Securities Regulatory Commission published "Regulations regarding implementation of postponing trading of shares from loss-making companies and putting an end to trading of such corporate shares" in February 2001.

(Xinhua News Agency April 5, 2003)