Make the problematic stocks only worth "bargain prices"

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Source: Beijing Business Today

The ongoing regulatory crackdown on the A-share market continues to intensify. On a single day, 10 listed companies were investigated and fined—this “no-corners-left” comprehensive supervisory system is forcing listed companies to strengthen their awareness of lawful and compliant operations. Under the crackdown storm, A-share differentiated valuation ecosystems are being accelerated in their development. High-quality stocks attract more attention, while problem stocks are continually discarded.

On the evening of April 3, 10 listed companies, including DianKe Digital (rights protection) and *ST Guandian (rights protection), were either investigated or fined. Among them, DianKe Digital and others “fell short” in information disclosure violations and irregularities. One of the controlling-party individuals behind Xianhe Shares, Wang Minglong, was also filed for investigation for alleged short-swing trading. The companies Yingjixin (rights protection) and Shuangliang Energy-saving (rights protection), which had been riding market hotspots, also received formal penalty notices. In addition, YiShang Display, which has already been delisted, and relevant responsible parties also received corresponding penalties.

As the penalty notices land in dense succession, they send the market an even clearer regulatory signal. With no corners left in supervision and accountability without exception for violations, once you touch the red line of illegal or noncompliant conduct in the capital market, delisting is not an “escape haven” to avoid punishment.

According to data previously released by the CSRC, in 2025 there were 701 cases involving violations of securities and futures regulations. Fines and penalties (including confiscations) totaled more than RMB 15.47B. In addition, 172 case leads involving alleged crimes were transferred to public security authorities. Malicious financial fraud cases, such as Renyi Pharmaceutical and Pulishi Pharmaceutical, were severely punished. Penalties and confiscations totaling more than RMB 100 million were imposed for cases including alleged manipulation of JinSuiChun and violations involving reductions in holdings by Tian Han. Intermediary institutions, such as CertiKong in YongXin (audit firm), Asia-Pacific Securities (AsiaTa Office), and Donghai Securities, were punished in accordance with the law.

The most direct impact of high-pressure supervision is to accelerate the process of differentiated valuations in A shares. This is because strict regulation guides market expectations, reshapes capital preferences, and the valuation performance of individual stocks on the exchange increasingly shows a “two-sided” pattern—ice and fire.

Problem stocks burdened with risks cool off. Tighter supervision makes the investment risks of problem stocks increasingly high, and everyone avoids them. Whether it’s information disclosure violations or illegal share reductions, once a listed company triggers an early warning for illegal or noncompliant conduct, it will be kicked out of the “watchlist” by market funds immediately. The fact that the stock price of those companies under filing for investigation falls sharply the next day is the best proof.

Once the risk alarm is sounded, the valuation shrinkage of problem stocks is only just beginning. Value-oriented investors will exit first to hedge risk. The flight of panic-driven funds will further pressure the company’s stock price. What remains in the market are mostly some speculative funds. But as liquidity becomes increasingly worse, speculative funds also lose the “soil” they need to survive, and ultimately will choose to leave as well.

The process by which all kinds of capital exit is also the process by which the valuations of problem stocks continue to shrink. In this process, the more it falls, the fewer people buy; the fewer people buy, the more it falls. The vicious cycle accelerates again, causing the valuations of problem stocks to drop further, and problem stocks are ultimately eliminated in an accelerated manner.

Meanwhile, quality growth stocks and leading stocks will become increasingly hot. In a tightly regulated market environment, capital pays more attention to the safety of individual stocks. The more a stock follows the rules and has stable performance, the higher its safety coefficient, and the more likely it is to win the favor of all kinds of capital.

Take patient capital as an example. Long-term holding places higher requirements on the fundamentals and safety of the investment target. Low-risk quality stocks and growth stocks will become the first choice for allocation.

Under strict regulation, capital keeps withdrawing from problem stocks and theme stocks, flowing into core assets with solid performance, compliance transparency, and standardized governance. The valuations of high-quality companies are reassessed, forming a positive feedback loop of “the strong get stronger.” Through repeated rounds of value re-rating, the valuation center of gravity for quality stocks and growth stocks will naturally rise in a spiral.

Good companies enjoy valuation premium, while problem stocks are only worth “cabbage prices.” Under strict regulation, this will be the future trend of A-share valuation frameworks.

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责任编辑：Gao Jia