A lot of listed companies have published their annual reports since this April, which featured more highlights than their predecessors by including more non-financial information to provide valuable assistance for investors in making decisions about their investment, thanks to the efforts of the Shanghai Stock Exchange (SSE) in propelling industry regulation.
Investors “thumb up” to non-financial information
After sorting out 2014 annual reports of relevant companies, it was found out that the information published is no longer just enigmatic financial data but more non-financial information, which largely facilitates investors’ decision-making.
Small and medium-sized investors used to find annual reports too professional and obscure to understand; even an industry analyst in a professional investment institution believes that the focus of corporate annual reports on publishing financial information makes such a report only a “quasi-financial-report”, by which investors can hardly have any foresight of corporate value.
Such dissatisfaction with annual reports of listed companies must be mostly pinned on the lack of non-financial information in annual reports, including corporate development strategy, business model, industry risk and core competitiveness. The analyst abovementioned pointed out that corporate annual reports in mature markets abroad stress publishing non-financial information as an active interpretation of financial data for investors, as well as showing the future investment value of their companies.
However, following the upward stock market this year and the SSE’s efforts in propelling industry regulation, it was found out that this years’ annual reports of SSE-listed companies showed much stronger activeness in publishing non-financial details in business, with some companies disclosing more related content. Investors also remarked that the annual reports this year are much more tangible and usable.
Trade leaders take the lead to “expose more”
According to the published annual reports, some trade leaders set a good example, such as Poly Real Estate Group, Gemdale Group, Sinopec and China Coal Energy, which volunteered to provide all-round analysis as to their trades in their annual reports, and valuable information for investors to grasp a better idea of their positions in their trades and of their investment values.
For instance, based on thorough data, Poly Real Estate Group made quantitative analysis and in-depth illustration as to key indexes concerning investors in the form of diagram, including the sale of commercial housing in the overall market, the area of newly constructed housing, and the area of land purchase and capital source in 2014, thus providing a full view of the real estate industry in 2014 for investors.
On the other hand, companies like Huaneng Power Int’l Inc. and Beijing Wangfujing Department Store (Group) Co., Ltd. (Wangfujing) had their annual reports highlight publishing of key operating data and explanations of hot issues in the market. Huaneng disclosed key operating data like the average utilization time of domestic power plants of the company within the annual report period, the average coal consumption of coal-fired units for power generation, and the average coal consumption rate for power supply, thereby directly presenting capacity utilization of the company in 2014 to all investors.
Considering the market environment for retail business, Wangfujing made a brief analysis and description of the issues drawing investors’ attention, including the businesses in traditional brick-and-mortar stores and online stores, as well as the company’s strategy change.
Analysts commented the publishing of non-financial information of a company enables average investors to find out the values and risks of a certain company beyond professional financial data, so that they will no longer readily make blind decisions.
The SSE encourages publishing of valuable information
Sources say, in addition to the obviously heightened activeness of companies in publishing non-financial information, the SSE is actively practicing industry regulation to review annual reports, hoping to bring out more non-financial information of listed companies and enhance the efficiency of annual reports.
It was reported that companies like Fangsheng Pharmaceutical, *ST Construction Machinery and Heilan Home actively responded to the SSE’s requirements for annual report review to publish a lot of valuable information for investors: Fangsheng Pharmaceutical published its product structure and R&D, *ST Construction Machinery made quantitative analysis of operating risks, and Heilan Home disclosed the core competitiveness of its business model based on the actuality of suppliers and POS terminals.
The publicized review comment letter indicated that the annual report review opinions of the SSE focus on key business information like company channel, model, reserve and business risk in addition to queries about future development strategies of a company, representing a regulatory orientation to the need of investors and the objective of seeking more useful information for investors’ decision making.
Some industry analysts in the securities companies said that due to the SSE’s stronger demand for non-financial information in the annual reports of listed companies, especially the enhanced review and disclosure of industry information, the readability and research value of corporate annual reports have been improved.
Market insiders pointed out the SSE has been promoting regulatory reform in recent years, including the industry regulation announced early this year, trying to step up in-process and aftermath regulation by hinging on information disclosure.
Sources from regulatory departments believe review of annual reports based on characteristics of different industries signals the SSE’s care for investors’ needs in pursuing industry regulation, and its efforts in providing more pertinent, specialized, interactive and refined regulation on information disclosure.
