Gulf equity markets need international reporting standards: expert

A Dubai-based expert on corporate governance has urged equity markets in the Gulf region to adopt international financial reporting standards to aid capital market growth, local newspaper Gulf News reported on Saturday.

The need of introducing such standards becomes imperative because lack of transparency and disclosure of information among listed companies is a primary cause of instability on regional equity markets, Nasser Saidi, executive director of Dubai-based Institute for Corporate Governance was quoted as saying.

The sharp market corrections and the subsequent period of volatility in 2006 were linked to lack of investor confidence in companies' performances, a factor which could be curbed by greater disclosure of information, he further explained.

Studies show that capital markets in the Gulf region have grown to more than 1 trillion U.S. dollars from 100 billion dollars in recent five years, but only Saudi Arabia's equity market ranks in the top ten of global emerging capital markets.

Citing an example of the current lack of harmonized reporting standards, Saidi said that two real estate companies in the United Arab Emirates (UAE) listed on the same exchange can use different methods to value their land ownership, unrealizing gains on its property or not doing so.

"You have to have the same foundation for accounting and auditing, but you also need to improve transparency and disclosure, such as the accuracy of accounts, if they are reported on time, whether people are informed and who checks them," said the expert.

With international financial reporting standards adopted, "both investors and the market become much better informed and will not be subject to rumors and knee-jerk reactions," Saidi stressed.

Source: Xinhua