No blanket extension in financial reporting deadline as SFC, HKEX prepare for delays amid travel restrictions caused by coronavirus outbreak
- HKEX, SFC issue joint guidelines to deal with pressure on financial audit and results ahead of March 31 deadline
- Mainland companies make up about half of Hong Kong-listed entities as their dominance grows
Hong Kong market regulators have decided not to give a blanket exemption for listed companies to delay their financial reporting beyond the March 31 deadline, after the accounting body highlighted potential delays caused by travel restrictions in mainland China and elsewhere.
Instead, the companies have been asked to get in touch with the regulators and provide explanations if they are unable to complete or issue their financial results on time as a result of the coronavirus outbreak, according to guidelines issued by the Securities and Futures Commission and the Hong Kong Exchanges & Clearing on Tuesday.
The regulators, however, said they will approve any delay on a case-by-case basis for those affected by the viral outbreak.
The instructions came after the South China Morning Post reported on Thursday that both sides of the industry held an emergency meeting to consider allowing companies to delay their 2019 annual results beyond the March 31 deadline, or issue unaudited results instead.
The coronavirus outbreak has prompted China to lock down several cities in central Hubei province, including the capital, Wuhan, where the deadly virus originated. The Chinese government has also disabled several transport hubs to contain the outbreak, while many carriers have since halted flights to mainland China and Hong Kong began to tighten border controls.
Hong Kong exchange, accountants mull extending reporting deadline amid travel bans, viral outbreak
There were 1,241 mainland Chinese companies listed in Hong Kong at the end of 2019, making up half of the 2,449 members of the bourse, according to exchange data.
They accounted for 73 per cent of the exchange’s market capitalisation and 83 per cent of the average daily turnover, reflecting their dominance and importance over the years to Asia’s third-largest capital market.
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“In such cases, the exchange will normally allow trading in the securities of the issuer to continue,” it added.
If companies considered they may miss the deadlines, they must tell the exchange immediately and should notify their shareholders, the regulators said. The regulators said they may halt the trading of companies if they did not provide sufficient information to the market.
The joint statement fell short of expectation and did not go down well with Clement Chan, managing director of BDO, which is the fifth-largest accounting firm in Hong Kong with over 200 listed companies as its clients. “It lacks clarity and effective responses seen by accountants to be helpful under the circumstances,” Chan said. “I am also not sure whether due and enough consideration have been given on the potential health threat and hazard posed to accountants in this matter.”
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Chan, who called for a blanket extension in reporting deadline, said almost every single listed company with December 31 year end will be affected. Even Hong Kong-based auditors were also required to work from home this week, he said.
A spokesman of the HKEX said it needed to consider all parties’ interests.
“The exchange and the SFC are aware that many issuers and their auditors are facing extraordinary circumstances and challenges and will work with them to seek a satisfactory solution for all stakeholders,” he said.
“It is the objective of the Exchange and the SFC to minimise disruptions to trading while ensuring that the investing public continues to receive sufficient information to make informed investment decisions.”
The Shanghai Stock Exchange on Saturday also said it would approve requests for a delay in result announcements on a case-by-case basis. Its members are still expected to announce their results by the end of April according to onshore listing rules.
