Transparency helps lure investors

Hong Kong companies have been making better use of narrative financial reporting to achieve greater corporate disclosure as part of an effort to attract the ever-growing pool of institutional investors in the city.

'More comprehensive disclosure in annual reports can definitely help attract investors because it shows the company is transparent and that the management really values investors and takes care of its shareholders. It is a gesture that can enhance the credibility of the company,' said Gary Sik Siu-kwan, managing director of DBS Asia Capital.

The narrative approach to financial reporting really took off following the Enron and WorldCom corporate debacles that rocked boardrooms to the core and forced regulators to implement tougher corporate governance and compliance regulations.

The annual report now acts as a platform for companies to strut their stuff to investors, in particular to institutional ones, who have the resources to meticulously comb through the fine print on each page to analyse the potential of a stock.

'Institutional investors are more demanding so companies are focusing more on their investor relations effort, and the annual report is an important part of that,' Mr Sik said.

China's staggering economic growth, the mushrooming wealth management industry, the launch of the Mandatory Provident Fund system in December 2000, and the trend of globalisation, have fuelled the rising number of institutional investors in Hong Kong.