Chinese XBRL Data On the Way

By Maria Trombly | Securities Industry News | January 30, 2006

Supporting the Chinese markets' push into the automated future, Edgar Online said it will be the first U.S. financial information company to deliver fundamental data on Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange (SZSE) issues in extensible business reporting language (XBRL) format.

The exchanges require their listed companies to report their data in XBRL, which enables investors regardless of technology platform to drill down into financial reports, make charts and comparisons and track historical data faster and more comprehensively than with older, manual methods. South Norwalk, Conn.-based Edgar Online, an avid promoter of the standard, announced the deal on Jan. 18.

XBRL has gradually been gaining momentum since its launch in 1999; many exchanges and regulators are moving to adopt it, and the U.S. Securities and Exchange Commission under chairman Christopher Cox is vocally advocating wider acceptance.

Edgar Online said that through relationships with information processing subsidiaries of SSE and SZSE, it expects to make the Chinese corporate data available to clients of its I-Metrix XBRL-based products in the first half of 2006. It will include current financial filings of all Chinese companies trading on the two exchanges as well as five years of historical data.

A survey of Edgar Online users indicated that China is the country most in demand when it comes to global data, said Jennifer Wu, the company's director of business development. "Close to 40 percent of all analysts who do country research are interested in China," she said.

And data from China is difficult to find, added Sue Childs, Edgar Online vice president for business development. Investors tend to be more familiar with Chinese companies that trade in U.S., London or Hong Kong markets, as opposed to those only listed domestically and not easily available to foreigners.

However, the Chinese government recently raised the allotment of domestic shares that can be bought by "qualified foreign institutional investors" from $4 billion to $10 billion. These shares go into mutual funds, hedge funds and other instruments. In addition, merger-and-acquisition activity is attracting interest in China, said Wu.

China is currently leading the world in its adoption of XBRL, she said. "And the data is good. It is easy to extract. It's all tabulated, with no footnotes like in U.S. data."

Elmer Huh, executive director of global valuation and accounting research at Morgan Stanley, said XBRL is a major advance in financial reporting. "You spend less time retrieving the data and more time on analysis," he said.

The SEC's Cox told an XBRL conference in San Jose, Calif. this month that even automated tools used to pull data out of SEC filings have error rates as high as 28 percent--and it's worse when footnotes are involved. "It's a hell of a way to run a capital market," Cox remarked.

On the broadening XBRL movement, Cox said, "I think we're at a tipping point." He promised additional incentives to U.S. companies that file in XBRL--the SEC is inviting volunteers to join a test group--including expedited reviews of their securities registration. "We're looking forward to a significant new wave of participants from all industries," he added.

SEC commissioner Paul Atkins elaborated on Cox's words in a Jan. 19 speech to the Securities Regulation Institute in San Diego (see page 6): "Chairman Cox has recognized that we cannot afford to be left behind by our foreign counterparts, who are already hard at work implementing this technology."

The tagging of financial-report components according to the XBRL standard "will make reporting faster, more accurate and cost-effective for issuers," Atkins continued. "It will also benefit users of the data--analysts, professional and retail investors--who will be able to collect, compare and analyze an ever-growing amount of relevant information. This, in turn, will benefit financial markets."