With other stock markets around the region moving towards quarterly reporting, Hong Kong risks looking like the laggard for continuing to require reporting of results only once every six months. But with the news that the stock exchange is planning to start a new round of consultation on the policy, there is hope for a change. The exchange will also propose public disclosure of directors' compensation.
These reforms would have been implemented last year but for strong opposition from vested interests in the business community. The quarterly reporting requirement was watered down to become a recommendation, while the pay disclosure rule was abandoned altogether. Now that the exchange is reviving the proposals, it should steel itself for the opposition to be just as strong as it was when the changes were proposed, and it should be prepared to argue that its proposals are in the best interests of shareholders, the exchange and Hong Kong in general.
To its credit, the exchange has implemented many of the corporate governance measures introduced last January as part of a sweeping package of reforms. The threshold for disclosure of major connected transactions was halved, to 5 per cent from 10 per cent, while penalties for failure to disclose were raised. The minimum number of independent directors required on company boards will also be raised from two to three. In a market where listed companies are so often still dominated by the families of their founders, and where directors and executives in the company are responsible for a major portion of share trades, having these rules in place represents a big step forward in protecting the interests of minority shareholders - and furthering the cause of corporate transparency overall.
But passage of these last two significant reforms will be the real test of the exchange's resolve to improve governance in Hong Kong's stock market. Corporate interests' concerns that quarterly reporting will raise costs or lead to rampant results-focused speculation will need to be addressed with convincing arguments. And so will directors' fears that they will be placed in danger if their pay packages, along with their names, are made public.
One of the best arguments in favour of real reforms in these areas is that they would bring Hong Kong into line with what are considered the highest standards in market regulation. Our bourse has a reputation for relatively clean operations and very little corruption. But that reputation stands a chance of being tarnished if loopholes that allow public companies to be less than perfectly transparent about their dealings are not closed.
As the city that wants to continue being the gateway for investment into the mainland - and the premier place for Chinese companies listing outside the mainland - Hong Kong should be setting the pace in terms of market regulation and corporate governance. Yet Singapore and Shanghai already require quarterly reporting, while mainland laws allow shareholders to sue directors for disclosing false information. Meanwhile, Hong Kong risks being seen as a place where the rich and powerful are able to bring regulators into submission by merely raising objections to measures that may well be in the best interests of shareholders and the market in general.