Asia has seen vast improvement in corporate governance over the past two years as regulators and securities exchanges tighten rules to boost company performance, raise investor confidence and guard their reputations.
Markets including Hong Kong, Japan, Singapore, South Korea, Taiwan and Thailand have been getting tough on rogue firms and introducing stewardship codes to encourage engagement between companies and investors, exchange chiefs and investors told a Reuters Financial Regulation Summit.
Hong Kong and Singapore, two of the region's largest financial centres, for instance have tightened listing and takeover requirements, and have stepped up enforcement after instances of erratic price movements sparked fear of manipulation in both markets.
Currently under discussion are stringent new rules on long-suspended companies and backdoor listings, and a review of Hong Kong's Growth Enterprise Market, David Graham, chief regulatory officer and head of listing at Hong Kong Exchanges and Clearing Ltd (“HKEX”), told the summit on Thursday.
"In the last 18 months we've been much more focused on listed company activity. We are looking to make sure we have quality companies and we have a quality regulatory system," said Graham.
Singapore Exchange Ltd (“SGX”), which was criticised for its handling of a penny stocks scandal in 2013, has stepped-up scrutiny of companies on its market and is reviewing their compliance with the state's corporate governance code. Results are expected in coming weeks, its chief regulatory officer said at the summit.
"All these are long-term measures designed to improve the quality of the market," Tan Boon Gin said.
Several markets are also falling in line with international standards on stewardship, with Hong Kong and Japan introducing codes to encourage investors to engage more actively with companies. Regulators in South Korea, Taiwan and Thailand are drafting similar codes.
Pru Bennett, head of investment stewardship for BlackRock Inc in Asia, said these codes were starting to make a difference, especially in Japan where companies wanting to engage with the world's largest asset manager have grown to 300 per year from 100 over the past two years.
"Japan is definitely changing and making progress," Seth Fischer, chief investment officer at Hong Kong-based activist hedge fund Oasis Management told the summit on Friday, saying it had become far easier to secure meetings and engage with company management. "The tone of meetings we are having is different, and they are taking action."
To be sure, many markets in the region still have a long way to go before they fall in line with corporate governance standards in London or New York.
While activist investors have been upping campaigns in Asia, BlackRock's Bennett said traditional institutional shareholders also had to "step up" and engage more with company boards to explain why they require more disclosures and how they use such information in valuation models.
"Institutional shareholders have a responsibility to contribute to that culture of change and not just rely on the regulators," she said.