Elevating your MD&A: Key takeaways from HKEX’s guidance on management discussion and analysis

At a glance…

Hong Kong Exchanges and Clearing Limited (HKEX) recently published a video providing practical guidance on management discussion and analysis (MD&A) disclosures by listed companies. The session covered why MD&A matters, what the Listing Rules require, recurring deficiencies HKEX has identified in its annual review of issuers’ reports, best-practice examples from listed companies in Hong Kong and overseas, and practical recommendations for elevating MD&A quality. With HKEX continuing to scrutinise the quality of annual report disclosures, listed companies should consider whether their current MD&A practices meet not just the baseline requirements, but the standard of transparency that HKEX and investors increasingly expect.

Who does this impact?

The guidance affects all companies listed on the Main Board or GEM of HKEX, and in particular their directors, company secretaries, chief financial officers, heads of investor relations, audit committee members, and sustainability leadership. It is also relevant to listing applicants who will be preparing their first annual reports in due course.

Why does MD&A matter?

MD&A is the section of the annual report where management explains the business beyond the headline numbers. Some people may see this as a box-ticking process focused solely on literal compliance with the Listing Rule disclosure requirements; yet HKEX has been issuing an increasing number of post-vetting enquiries to issuers after the publication of their reports. Leading issuers (and legal counsel) recognise financial reporting as a powerful tool for transparency. Presenting a fair and accurate view of the issuer’s performance, complete with insight into key operational and business issues, the drivers behind these issues, and the strategies being pursued going forward, ultimately strengthens shareholder trust.

Taking control of your MD&A (rather than making minimal disclosures for compliance) not only demonstrates strong corporate governance but could also strengthen investor relations. MD&A should be segmented by business division, with a narrative for each that explains the drivers of performance – not just the “what”, but the “why”. There is no prescribed minimum or maximum length. The test is materiality: whether the content addresses what is really relevant for shareholders to form an informed view of the issuer.

What do the Listing Rules require?

Under the HKEX Listing Rules, issuers must provide commentary on a prescribed set of areas, including but not limited to:

• Business review
• Liquidity and financial resources
• Capital structure
• Significant investments
• Material acquisitions and disposals
• Segmental information
• Employees and remuneration
• ESG policies and performance

HKEX emphasises that issuers must move beyond mere box-ticking to deliver meaningful insights to shareholders and the investing public.

What does HKEX recommend?

HKEX has published guidance material for listed companies setting out four areas to enhance MD&A quality:

1. Strategy and prospects – Disclose long-term objectives, together with execution plans, timelines, and milestones.
2. Business review – Explain the business model, discuss key external factors (e.g., economic/industry downturn, increased market competition, and trade restrictions arising from geopolitical tensions) and internal factors affecting performance (e.g., any significant events, major transactions, or strategic pivots during the reporting period), and use industry-appropriate metrics and KPIs with year-on-year comparisons. Material line items (e.g., other expenses) should also be explained.
3. Principal risks and uncertainties – Provide an in-depth discussion of material risks and uncertainties, their actual and likely financial impact, and the mitigation measures being taken.
4. Liquidity and financial resources – Provide a clear assessment of the current liquidity position, how capital expenditure commitments will be fulfilled, and whether any fundraising is anticipated. HKEX notes that this area is often underdeveloped in practice.

The overarching standard from HKEX’s guidance is that MD&A should be “fair, balanced, and understandable” – presenting both good news and bad news with equal clarity and equal weight. Directors are encouraged to challenge past practices: if the MD&A looks substantially similar to last year’s, the sensible question is whether there is room for improvement.

What deficiencies has HKEX identified?

HKEX’s recent annual review of issuers’ reports has identified four recurring themes:

Deficiency	What HKEX has found
Breadth and depth	Figures are recited without explanation. There is limited insight into the business model, strategy, or what is actually driving performance.
Connectivity	Material issues highlighted in one section of the annual report (e.g., the ESG report) are not reflected in the MD&A. The annual report should be read as a coherent whole, and the MD&A should not be disconnected from other disclosures. Other common connectivity issues may include (i) disclosing the commencement of a new business without discussing how such business and related capital expenditures will be funded; and (ii) highlighting risks arising from certain regulatory changes (in the “Risk Factors” section) but failing to discuss the potential impact on financial performance and management’s strategies to address such risks (in the “Prospects / Outlook” section).
Consistency	Information or metrics that appeared in last year’s MD&A sometimes disappear without explanation. If an important metric is omitted in this year’s MD&A, shareholders deserve to know why.
Balance	Achievements are overemphasised while risks and challenges are downplayed.

Listed companies should review their existing MD&A disclosures against these four themes to identify areas for improvement.

Best-practice examples

HKEX highlighted the following disclosure examples in various annual reports:

• CLP Holdings (Hong Kong) – When revenue declined, CLP pinpointed specific operational and market factors driving each movement (lower electricity consumption and prices in Hong Kong, two power stations generating less in Australia, mainland China as a bright spot) rather than putting a positive spin on the numbers. Every movement in the financial tables was tied back to specific explanations, connecting numbers to narrative and building investor confidence and trust.
• Mirvac (Australia) – Mirvac presented risk as a dynamic and evolving picture rather than a static checklist. The disclosure showed how risks evolved compared to the prior reporting year and how the company addressed them, demonstrating active risk oversight. The layout was clean, structured, and easy to navigate.
• ITOCHU Corporation (Japan) – ITOCHU used a CFO interview format to provide detailed explanations of how the company handles external challenges, including the CFO’s thought process and specific assumptions (e.g., a 5% impact of external challenges on core profits). The principle is that any company can draw inspiration from this level of candour and detail when preparing its MD&A, regardless of the format adopted.

Act now

As we are now approaching the last quarter of 2026, your finance and compliance departments may want to start considering what changes should be made to your usual MD&A section and whether those changes will require new data collection practices for the remainder of the 2026 reporting period. Don’t wait until the first quarter of 2027 when you could be swamped by the usual annual audit workstreams. 

We recommend that you:

1. Secure strong direction from senior management and the audit committee. Effective MD&A starts from the top. Senior leadership and the audit committee should treat MD&A not merely as a compliance exercise, but as a strategic communication opportunity – a way of telling the company’s value creation story. Active involvement from senior leaders, including robust challenge and debate, tends to produce a more balanced view of risks and opportunities and an improved overall standard of reporting.
2. Establish a formal cross-functional working committee. Bringing together the CFO, audit committee chair, company secretary, head of investor relations, sustainability leadership, head of strategy, and representatives of other relevant functions avoids producing MD&A in silos. Regular alignment between divisions can help identify material matters early and produce a more coherent, investor-friendly narrative that integrates financial results with strategic priorities, sustainability initiatives, and forward-looking commentary.
3. Conduct proactive outreach to investors. Rather than guessing what investors want to read, listed companies are encouraged to actively engage their major shareholders and participate in investor forums and industry groups (such as the Asian Corporate Governance Association) to gather feedback on what investors expect in terms of depth of analysis, clarity on key assumptions, risk sensitivity, and sustainability integration. An investor-centric approach helps close expectation gaps and ensures that the MD&A adds real value.