BROKERS are sceptical about attempts to bring Hong Kong's disclosure regulations in line with international stock market standards. Some have questioned the wisdom of the likely introduction of new rules following last week's report by a working group on financial disclosure. ''This market is not under-regulated, just enforcement is lax,'' said Clive Weedon, director of research at Nomura Research Institute. The report is aimed at addressing some of the deficiencies in Hong Kong's financial disclosure requirements. These include overhauling the system for developing accounting standards, upgrading the system for monitoring compliance with the standards, specific changes to disclosure requirements in the Stock Exchange Listing Rules and amendments to some of the disclosure requirements of the Companies Ordinance. Mr Weedon agreed the system was not working well, but was uncertain whether or not the working group was on the right track. ''There is no doubt that extraordinary items, in particular, have been abused in Hong Kong. Disclosure rules have, generally, been liberally imposed here, and many companies have not done much to help,'' he said. But Mr Weedon believed doing away with extraordinary items, as suggested in the report, would make life more difficult for analysts. ''If the new regulations on extraordinary items go through, we will have to dive into the reports drag out the extraordinary items buried somewhere inside,'' he pointed out. ''Companies will do their best to hide extraordinary profits, and the regulations will support this.'' Research director at Crosby Securities Archie Hart said that, although the rules on disclosure had improved over the last five years, a lot more still needed to be done. ''Considering Hong Kong looks set to be the security market for a quarter of the world, we need tip top regulations,'' he said. Mr Hart believed that, in some aspects, China was holding Hong Kong back, and was likely to do so for many years to come. ''China has never been run by the rule of law. The country is run by relationships, and regulating relationships is virtually impossible,'' he said. ''Hong Kong's regulatory authorities face a growing headache as businesses become increasingly involved with China.'' Chairman of the working group and non-executive director of the Securities and Futures Commission, Roderick Chalmers, said it was a misconception that changing the rules on extraordinary items would make the accounts more difficult to decipher. ''With the companies' stock prices increasingly defined by the price/earnings ratio, the shareholder should have more information on a company's earnings.'' Paul Phenix, chairman of the Accounting Standards Committee of the Hong Kong Society of Accountants, and executive director of compliance at the Stock Exchange of Hong Kong, said he was surprised at the criticism aimed at enforcement. In London, the belief tended to be that the territory was well-equipped in this regard with the Professional Standards Monitoring Committee and the Company Accounts Review Committee, he said. He admitted Hong Kong did not have an equivalent of the British Department of Trade and Industry (DTI). ''Although the Government feels that, unless it receives adverse opinion from the auditor, it is difficult to prosecute, the Hong Kong Society of Accountants does not share this view. We believe the powers are there under Section 123 of the Companies Ordinance,'' Mr Phenix said. Mr Phenix said Hong Kong had to make up its mind what it wanted to be. ''If Hong Kong wants to be a major international player, it needs international rules and standards. I do not think we would have had the level of US investment the local market has enjoyed over the last year without the changes in compliance and listingrules.'' To some extent institutions accept the risk-reward scenario in a place like Hong Kong. Mr Hart believed what institutions wanted was a level playing field - a difficult in Asia, where the company managers were usually the owners. Mr Hart pointed to regular stock manipulation on the Hong Kong stock market just prior to an announcement. But Mr Chalmers still believed with the increasing globalisation of the financial industry, Hong Kong needed to keep up with the competition or it would lose out. There is an underlying implication among many analysts that the market will regulate itself. Companies which want access to international funds will have to become more transparent in line with international standards. Mr Weedon said: ''As the Hong Kong stock market becomes more institutionalised, and it becomes a more international environment, companies will be forced to disclose more.'' But David Sun, a partner with accountants Ernst and Young and member of the Accounting Standards Committee, said his profession took the lead in establishing the rules with regard to issues such as disclosure, and this increasingly meant Hong Kong will move into line with international standards.