Exchange defies critics of blackout The Hong Kong stock exchange, wrestling with pressure from lawmakers and tycoons alike, said yesterday it would delay but not withdraw its controversial plan to extend a ban on directors selling shares in their companies before earnings announcements. The move, intended to curb insider dealing, would bar them from trading the shares for up to seven months a year. 'The listing committee will not be withdrawing the rule,' Hong Kong Exchanges and Clearing said after a meeting of the committee yesterday. 'The listing committee is entirely satisfied with the integrity of the consultation process relating to these proposals.' However, HKEx said it had decided to delay by three months, to April 1, the implementation of the rule, which had been due tomorrow. More than 230 listed companies and several high-profile corporate leaders, including Bank of East Asia chairman and chief executive David Li Kwok-po and Orient Overseas (International) chairman Tung Chee-chen, have publicly objected to the rule change. The exchange's response surprised lawmakers, who, earlier yesterday, passed a non-binding Legislative Council motion in favour of postponing by six months the extension of the trading 'blackout'. The rule would ban directors and key shareholders from trading their shares between the end of annual and interim reporting periods and the public announcement of earnings. These twice-yearly gaps can last three months or more. The current blackout is for one month prior to earnings announcements, leaving directors and certain shareholders up to two months to trade on inside information that is not public. Opposition to the rule change intensified after 238 listed companies - including Li Ka-shing's Cheung Kong (Holdings) and Hutchison Whampoa, Swire Pacific and units of the Kuok Group such as Kerry Properties and SCMP Group, publisher of the South China Morning Post - signed an open letter opposing the move, which was published in major newspapers on Monday. They claimed it could stop directors of companies that issue quarterly results from trading shares in them for nine months each year and would discourage foreign investment in Hong Kong and directors serving on boards. HKEx requires six-monthly earnings announcements. Last night, a spokesman for the group said it was very disappointed with HKEx's 'arbitrary handling' of the issue. 'The group is particularly disappointed by the blatant refusal of HKEx to conduct further consultation,' the spokesman said. The decision showed a total disregard for the strong and unprecedented objections of market participants and the views presented by listed companies, professional organisations and business associations, the group said. 'I am totally disappointed and very sad for Hong Kong's development as a financial centre,' said Abraham Razack, the legislator representing the real estate and construction sector. He said HKEx appeared to have ignored a call yesterday by Secretary for Financial Services and the Treasury Chan Ka-keung for it to listen to more opinions and strike a balance. However, a source close to the listing committee said the measure was in the long-term interests of investors. Moreover, the source said, the stock exchange had provided adequate time for listed companies to review the suggestion. Observers have pointed out that companies could shorten the trading blackout period by reducing the gap between the end of a reporting period and the announcement of earnings.