Should Bursa Malaysia scrap mandatory quarterly reporting?

Earlier this week, the Singapore Exchange announced it would no longer require companies to report earnings on a quarterly basis in line with other major markets like London and Hong Kong. — Picture by Firdaus Latif
Earlier this week, the Singapore Exchange announced it would no longer require companies to report earnings on a quarterly basis in line with other major markets like London and Hong Kong. — Picture by Firdaus Latif

KUALA LUMPUR, Jan 12 — Economists and corporate figures are split on whether Bursa Malaysia Bhd should allow listed companies to drop quarterly financial reporting and instead go for half-year and full-year reporting.

This was in response to the decision by the Singapore Exchange (SGX) to no longer require companies to report earnings on a quarterly basis in line with other major markets like London and Hong Kong, as the procedure could help save time and cut compliance costs.

The change, which comes into effect on February 7, 2020, however, does not apply to companies in financial distress or facing regulatory issues.

Asked if the local stock market operator Bursa Malaysia should implement a similar practice, Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said it would be a good move.

“But the main issue here is disclosure of information and to ensure investors make an informed decision based on available data. Financial data is one of the relevant (sources of) information which can be dated to some degree,” he told Bernama.

Bursa Malaysia has 790 companies listed on the Main Market and 129 on the ACE Market, as well as 30 companies on the LEAP (Leading Entrepreneur Accelerator Platform) Market.

He said half- and full-year reporting would suffice as this will reduce the regulatory cost incurred by listed companies and is also in line with global practice.

“If there is a huge corporate exercise like a merger and acquisition, joint venture, regulatory changes in the industries that they operate in will be disclosed to the investors at large. So the spirit of full disclosure is pretty much intact,” he elaborated.

AirAsia Group Bhd chief executive officer Tan Sri Tony Fernandes on his Twitter account seconded SGX’s move.

“Brilliant move by Singapore Exchange in removing quarterly earnings (report), allowing the company to think longer term,” he said, while expressing hope that other Asean stock exchanges would follow suit.

On the contrary, Wazan Capital director Izrul Zainal Abidin said Singapore might have good reasons to implement the measure but such a move may not be applicable to Malaysia.

For instance, a company could be in financial trouble but regulators such as Bursa Malaysia and investors would only come to know about it after six months or a year.

But with a quarterly report, this can be flagged immediately, he said.

Such a delay means investors would not be making informed decisions for their investment since they do not have access to the quarterly report.

However, he acknowledged that there will be less work for auditors and regulators since their services would then be required only once a year, but noted that the move is only beneficial to listed companies.

Echoing Izrul’s views, economist Datuk Nazri Khan said the quarterly report is crucial, especially to investors.

“We have a lot of stock holding for less than six months, especially for the retail sector. The problem is there will be a burden on compliance and companies.

“In my opinion, I think we have to follow the best practice which is in the US, and the US stock market practises quarterly reporting,” he added.

United Plantation Bhd chief executive director Datuk Carl Bek-Nielsen said quarterly announcements still have their merits specifically if they can help protect shareholders’ interests  by providing a just and fair account of the performance of a respective company.

“I am a strong supporter of long-termism when making decisions as certain strategic decisions take time to mature. But while I advocate long-termism over short-termism, I would like to qualify that companies need not abort the ability to make long-term decisions just because you have to make quarterly announcements. Be strong and make yourself accountable for why decisions are made.” — Bernama

Related Articles