Discrepancies in accounting standards limit gains on KSE

[Naveed Yaseen]

KARACHI: The controversy over ‘accounting standards’ for listed companies at the Karachi bourse convinced investors to indulge into profit-selling, but short-covering on selective counters helped the market reduce intra-day notable losses to moderate.

KSE 100-share Index shed 23.96 points or 0.43 per cent and concluded at 5,573.48 points.

The day’s highly volatile session opened on a weak positive note and managed to climb up to 5,676.58-point intra-day high, gaining another 79.14 points from the pre-opening level of 5,597.44 points.

Low turnover in the wee hours enhanced the ‘deficit of confidence’ among investors and provoked them to indulge into profit-selling. With multiple ‘ups and downs’ during the session, the unstable market dipped to a 5,486.08-point intra-day low, losing 190.50 points from the day’s peak level before the closing bell rang.

However, notable buying in some heavy weighted stocks during the day, ie MCB Bank, Habib Bank, Standard Chartered Bank and return of Oil & Gas Development Company, Pak Oilfields, United Bank and Adamjee Insurance to the positive territory in the closing hours helped reduce intra-day high losses to moderate.

The parallel running junior 30-Index inched back by a mere 3.95 points or 0.07 per cent, ending at 5,630.83 points.

Analysts said that investors agreed to book profits for two reasons: firstly, the market had regained 782.10 points or 16.24 per cent in the last two weeks that had placed many stocks in relatively overbought position and correction and consolidation in stocks before they advance to the next higher level was not surprising.

Secondly, likely changes in controversial accounting standards in accordance with the local needs and to cope up with emerging burning-issues on the balance sheet changed investors’ mindset to uncertain.

The issue of standards in accounting was: should listed companies show the impact of investment-losses at the local bourses in their net earnings for 2008 (which the international standards demand for), or not?

Generally, there was a consensus among the stock market stakeholders including associations of mutual funds, commercial banks, investment banks, leasing companies, modarabas, insurance companies and brokerage houses that companies should not show losses in net earning for one year period, but keep maintaining losses in the category of ‘equity’ on the balance sheet.

Representatives of their associations were of the view that companies were yet to come out of the 2008 stock market depression in Pakistan and implementing International Accounting Standards 39 (IAS-39) in ‘letter and spirit’ would kick-off another crisis immediately.

The minutes of the meeting among stakeholders at ICAP, which was held last Saturday, have been received by Securities & Exchange Commission of Pakistan (SECP) and it would issue guidelines and news standards for accounting on Tuesday (today) in the light of minutes of the meeting.

Therefore, the day turnover was recorded at 174.060 million shares, which was 5.2 per cent lower than 183.750 million shares which changed hands on the weekend. The future market again turned lull with zero share turnover against 20 shares turnover in the last working session.

In accordance with the overall market situation, overall market capitalisation was reduced by Rs9 billion and stands at Rs1,755 billion.

Out of the total 277 active stocks on board, 166 declined, 106 advanced, while the value of five stocks closed unchanged.

Highest volumes were witnessed in Oil and Gas Development Company at 18.373 million shares closing at Rs50.05 with a gain of five paisa, followed by National Bank at 11.428 million closing at Rs63.27 with a loss of Rs2.41, NIB Bank at 9.590 million closing at Rs5.17 with a loss of 23 paisa, TRG Pakistan at 9.496 million closing at Rs1.25 with a loss of 24 paisa, and Pakistan Telecommunication Company at 8.862 million closing at Rs14.71 with a loss of 33 paisa.

http://www.thenews.com.pk/daily_detail.asp?id=161674