Market players bet big on M&A deals

In mid-November, Shanghai-listed Meihua Holdings Group Co announced in an exchange filing that it would acquire Ningxia Eppen Biotech Co, a company valued at 3.82 billion yuan ($620.7 million). It is worth noting that Eppen suffered losses in 2013 and in the first seven months of this year.

It hardly makes sense for a company to pursue a merger deal that won't make it stronger. Yet, many listed companies in China have engaged in counter-intuitive merger and acquisition (M&A) deals like the one mentioned above. During the first three quarters, publicly traded companies took part in M&A transactions involving a total disclosed sum of 1 trillion yuan, an amount that already exceeds last year's full-year total, according to figures from the China Securities Regulatory Commission. Meanwhile, shares of more than 200 companies have been suspended from trading for major issues, most of them related to M&A deals, asset restructuring and backdoor listings.

This enthusiasm for M&A is being stoked by speculation surround companies that could become involved in such deals. Needless to say, this hurts the healthy development of the mainland stock market and the interests of investors.