Jake's View

Tardy MTR Corp must tell stock exchange about its delays

With another project behind schedule, MTR Corp must remember that as a listed firm it has to disclose price-sensitive information to investors

PUBLISHED : Thursday, 15 May, 2014, 12:52am
UPDATED : Thursday, 15 May, 2014, 12:52am

A second major MTR project could be coming off the rails with revelations that an archaeological discovery on the Sha Tin-Central rail link may mean work will not be completed on schedule, resulting in a million-dollar loss for every day of the delay.

SCMP, May 13

I have always believed that Donald Tsang Yam-kuen's thinking was a little muddled when, as financial secretary in the late 1990s, he decided that MTR Corp should be listed on the stock market.

I suppose the idea came about as a late developing case of Thatcherism - privatisation is good because it will bring efficiency to the running of public services such as railways.

All that Donald did, however, was sell 25 per cent of the MTR's stock to outside investors. The government never relinquished control over the MTR.

He also had his figures wrong from the start. He thought the corporation had a value of about HK$100 billion, and said so in public. The investment bankers said HK$25 billion.

In order not to lose face, Donald then told the Lands Department to stuff the company full of cheap property with relaxed development restrictions.

It was done and a market capitalisation of HK$100 billion achieved - the Modern Town Redevelopment Corporation.

This set the tone for the government's thinking about the MTR ever since - ours to do with as we please and answerable to us alone but we shall let you have a few shares because we're nice guys.

The law treats the government as just an MTR shareholder and has nothing to say about Legco

In practice this has meant accountability to the Legislative Council as Legco has the ultimate say in public spending and there is a lot of it in the MTR. But that is as far as any effective notion of accountability goes.

The law takes a different approach. It says that directors of listed firms are responsible for ensuring that price-sensitive information is disclosed to the investing public as soon as reasonably practicable.

Disclosure means full reports to the stock exchange. Failure to carry out this requirement can have the offender brought in front of a market misconduct tribunal (a regulators' kangaroo court) and fined up to HK$8 million as well as being subjected to other penalties.

I have always thought this to be bad law. There is far too much uncertainty as to what constitutes price-sensitive information and too much weight given to regulators' opinions rather than to those of actual market practitioners.

But the point is that, for these purposes, the law treats the government as just another shareholder and has nothing to say about Legco. It requires disclosure to the stock exchange.

If members of Legco wish to read stock exchange reports, all well and good but the stock exchange comes first.

Yes, I agree that regulators have got a little full of themselves with rules like this but our bureaucrats can have no objection.

They proposed this legislation and Legco passed it.

We are now told that the MTR faces big losses because of delays in the Sha Tin-Central Link. It was revealed by a Highways Department bureaucrat to the Kowloon City District Council. I checked the stock exchange website. Nothing about it there.

This, of course, comes after Transport Secretary Anthony Cheung Bing-leung, a director of the MTR, confessed that he knew in November about the likelihood of delays in the high-speed rail link to the border but did not tell Legco.

Of more importance, he did not tell the stock exchange.

It was clearly price-sensitive information and I cannot see how our Securities and Futures Commission can close its eyes to such a blatant breach of a law it assiduously sponsored.

Message to Ashley Alder, chief executive of the SFC: What are you going to do about it, Sir?