bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

paywallTypes

createdDate

publishedDate

urlAlias

moreOnThisArticles

sponsorType

commentCount

authorLocations

authors

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

articleSpeeches

socialHeadline

headline

images

flag

firstTopic

glossary

flattenTypeIds

image

relatedLinks

relatedNewsletters

__typename

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

SCMP Reporter

MISLEADING annual results issued by China B share companies have cast doubt over the prospects for investment in the B share market by overseas investors.

  Profit figures issued last week by a number of Shanghai firms were exaggerated by as much as 110 million yuan (about HK$148 million) and firms have deviated away from core business into speculative projects.

  Hongkong brokerages are publicly complaining about the abuse of reporting procedure and aim to raise the matter with Chinese authorities.

  ''We don't take these reports seriously,'' said Mr Stanley Ng, research manager of Standard Chartered Securities.

  ''The details are very confusing. The question has to be asked: how can overseas investors put their money into B share stocks on the basis of the information provided in the annual reports of B share companies?''   At the centre of the problem is the slow adoption of international reporting procedures and accountancy standards.

  At present, there are two accounting systems in China.

  A share companies announce their annual results based on Chinese accounting principles, while B share companies are meant to follow the international standard, known as the International Accounting Standard (IAS).

  As all B share companies are also listed in the A share market, the companies have to prepare two sets of financial figures based on the two different accounting principles.

  One is the annual report based on the Chinese accounting principles for the A-shareholder and the other is the internationally-audited annual report for the B-shareholder.

  ''The companies should have published the two sets of financial results simultaneously in order to avoid the confusion. But no B share companies have followed this basic requirement,'' said Mr Lawrence Ang, associate director of SBCI Finance Asia.

  Shanghai Vacuum announced its report for A-shareholders on March 20 and published the same report in Hongkong on March 23. It is unclear when the company will publish its audited report as well.

  ''It's the first year for almost all China's B share companies to publish their annual reports. I have told them to follow the international practice and it's the best chance to give a good image to international investors. But they don't listen to me,''said Mr Ang.

  According to the Companies Ordinance in Hongkong, listed companies must issue their annual report at least 21 days before the annual general meeting (AGM) in order to allow enough time to study the report.

  However, there are no guidelines on reporting procedures in China.

  The result is confusion. Shanghai Erfanji held its AGM on February 21, while it published its reports for B-shareholders on March 4 and A-shareholders on March 20.

  Shanghai Chlor Alkali held its AGM on March 12 and announced its annual report for A-shareholders on March 20.

  It is unclear when the company will publish its audited report for international investors.

  Shanghai Vacuum is at the centre of a number of complaints. It announced profit growth of 311 per cent to 72.9 million yuan.

  But it did not indicate that the report was based on Chinese accounting principles.

  According to Smith New Court in Hongkong, far from showing a healthy profit, the company would have a 40 million yuan loss under the IAS because of extraordinaries.

  ''It fails to announce the figures in Hongkong and in Shanghai at the same time, plus the figures are wrong.

  ''The B share buyers in Shanghai could take the unfair advantage to speculate,'' said Mr Andrew Bell, managing director of South China Capital.

  Mr Norman Li, director of Smith New Court, claimed: ''A large proportion of the company's profits are generated by stocks and property speculation.

  ''The company should explain its investment portfolio in this business operation.''   He added: ''They [the B share companies] will never inform you when they publish their annual reports. They have to give us prior notice. The problem is no authorities are accountable.''   Shanghai Chlor Alkali announced its audited net profit figure for A shares in the Shanghai Securities Post but made no similar announcement in Hongkong.

  ''It's unfair because not all international buyers could get this information. If the company wants to publish the audited figure, [it should] make sure that everybody has access to the details at the same time,'' said Mr Ang.

  Mr Ang last week made a formal complaint to the People's Bank of China about what he claimed were slack practices in Shanghai.

  The bank was previously in charge of all securities issues in Shanghai. But Mr Ang was referred to the Shanghai Securities Committee.

  ''But nobody knows who the Shanghai Securities Committee is; no one knows how to contact them,'' he added.

  There are 10 B share companies in Shanghai and seven in Shenzhen. They have been recommended to publish their annual reports by the end of March.

  Shanghai Wing Sung will announce its annual report and hold its AGM today.

  ''We've tried to persuade other B share companies to follow the international practice and we definitely will bring the problems to the Chinese authorities soon,'' said Mr Ang.



B share reports come under fire