Exchange may trade longer blackout for quarterly reporting

PUBLISHED : Wednesday, 14 January, 2009, 12:00am
UPDATED : Wednesday, 14 January, 2009, 12:00am

The stock exchange might review the controversial extended blackout period on director share sales, but only if Hong Kong companies agree to another measure to lift market transparency - quarterly reporting.

It is the first time the exchange listing committee has stated its conditions for softening the controversial rule, which, if implemented as scheduled on April 1, will ban directors from trading shares of their companies for up to seven months a year. The existing ban lasts two months.

The exchange wants to extend the blackout period before earnings announcements to curb insider trading and improve market transparency.

But the plan has been opposed by the city's business elite. Previous attempts to introduce quarterly reporting have also been rebuffed as expensive and unnecessary.

After strong opposition from listed firms, the listing committee on December 30 moved the rule change from January 1 to April 1 but rejected another round of consultations.

The listing division head, Richard Williams, yesterday said the listing committee would reconsider the plan only if the city put in place a new reporting regime to give investors more information. He said Hong Kong firms had one of the longest reporting deadlines worldwide but that would be shortened next year.

The new deadline for annual results will be shortened from four months after the close of a company's books to three months, while the deadline for interim results will be shortened from three months to two.

The listing committee has proposed introducing as soon as this year the British style of quarterly reporting, which requires companies to give management statement updates between the interim and annual reporting.

The Securities and Futures Commission has not yet approved this proposal, as it seeks more information on the plan's impact on markets.

Mr Williams said the exchange would soon provide the SFC information on quarterly reporting that would allow the regulator to make a ruling.

'The listing committee decided on the current blackout period proposal based on the current reporting regime. Only if Hong Kong has quarterly reporting and shortened reporting deadlines is it worth it for the listing committee to reconsider if we need a shortened blackout period,' Mr Williams said.

Mike Wong Ming-wai, the chief executive of the Chamber of Hong Kong-Listed Companies, said the chamber would support a new round of consultations on quarterly reporting, shortening of reporting deadlines and the blackout period.

This was echoed by Abraham Shek Lai-him, the legislator for the property and construction sector, who has opposed the blackout proposal. 'It will be a good idea to have another consultation paper on the three issues of quarterly reporting, reporting deadlines and blackout period as they are related to each other,' he said.