Hong Kong Exchanges and Clearing Limited (HKEx) today (Friday) published a consultation paper on periodic financial reporting. 

The consultation paper seeks the market’s views regarding: the shortening of reporting deadlines for half-yearly and year-end results announcements and reports for Main Board issuers; the introduction of quarterly reporting requirements for Main Board issuers; and alignment of the Growth Enterprise Market, or GEM, Listing Rules related to quarterly reporting with the proposed new Main Board requirements.

“In a 2002 consultation paper, we proposed to amend the Main Board Rules to shorten the time allowed for the release of results announcements and reports and to require quarterly reporting by Main Board issuers. After taking into account the diverse views of respondents to that consultation, we decided to encourage Main Board issuers to adopt quarterly reporting as a recommended good practice and not to change the deadlines for half-year and annual reporting. We also decided to keep both matters under review”, HKEx’s Head of Listing, Richard Williams, said.

Mr Williams explained that “in light of developments in overseas markets and in view of the increasing trend of dual “A” and “H” share listings and increased cross border capital flows with Hong Kong, it is appropriate to reconsider these matters.”

“We believe implementation of the proposals would increase transparency and address concerns about the development of an information asymmetry between management, insiders and the investing public and bring Hong Kong’s reporting standards into line with the standards in most of the other major international financial centres,” he said.

“Under our proposals, the changes would be introduced in phases to provide listed issuers with time to prepare for and meet the new requirements,” Mr Williams added.   

HKEx seeks comment in response to the consultation paper by 5 November 2007.

The consultation paper can be downloaded from the HKEx website at www.hkex.com.hk/eng/newsconsul/mktconsul/marketconsultation.htm. Copies are also available from the HKEx offices at 11/F, One International Finance Centre, 1 Harbour View Street, Central, Hong Kong. Interested parties are encouraged to respond to the consultation paper by completing and returning the questionnaire booklet which is also available at
www.hkex.com.hk/eng/newsconsul/mktconsul/marketconsultation.htm.

Background

The consultation paper sets out a number of proposals as well as the draft Rule amendments that would be needed to implement those proposals. The proposals and draft Rule amendments have been prepared in consultation with the Securities and Futures Commission.

Summary of the consultation proposals

In the consultation paper, HKEx proposes:

Shortening of reporting deadlines

1.	To shorten the time allowed for the release of half-year results announcements and reports by Main Board issuers from three months to two months. The new deadlines would commence:
	For “large companies” (as defined in paragraph 21 of the consultation paper but, very generally, listed issuers with a market capitalisation of $10 billion or more) – starting from their half-year accounting periods ending on or after 30 June 2008; and For other companies – starting from their half-year accounting periods ending on or after 30 June 2010.
2.	To shorten the time allowed for the release of annual results announcements and reports by Main Board issuers from four months to three months. The new deadlines would commence:
	For “large companies” – starting from their annual accounting periods ending on or after 31 December 2008; and For other companies – starting from their annual accounting periods ending on or after 31 December 2010.
3.	No change to the reporting deadlines for half-year and annual reporting for GEM issuers.

Quarterly reporting by Main Board issuers

4.

To require quarterly reporting for Main Board issuers. The quarterly reports would have to be published no more than 45 days after the financial period and would have to include certain key information. They would not be required to be audited and, unless a shareholder makes a request, would not be required to be printed and mailed in hard copy to shareholders. The new requirements for quarterly reporting by Main Board issuers would commence:

For “large companies” – starting from their three months quarterly accounting periods ending on or after 30 September 2008; and For other companies – starting from their three months quarterly accounting periods ending on or after 30 September 2010.

Changes to quarterly reporting by GEM issuers

5.

To amend the current GEM Listing Rules to align the disclosure and publication requirements for quarterly reporting to be the same as the proposed new Main Board quarterly reporting requirements. The changes would commence with GEM issuers’ three months quarterly accounting periods ending on or after 30 September 2010.

Timetable

If the proposals are adopted, HKEx plans to implement them in phases, commencing in 2008.