July inflation rate highest in 27 years

PETALING JAYA: The consumer price index (CPI) jumped to 8.5% in July from a year earlier, the highest in nearly 27 years, fuelled by the increase in the price of petrol and electricity tariffs.

CIMB Research head Lee Heng Guie said: “This exceeds our expectations. It clearly shows the impact of the increase in fuel and electricity prices and continued strong food prices.”

He said inflation was likely to peak this month or next before easing in the final quarter.

“We expect the inflation rate in 2009 to be much lower than this year’s, but it will depend on the movement of oil prices,” Lee told StarBiz.

“It appears the global economic growth could undergo some slowdown. This would lead to softer demand for food and commodities, bringing prices lower and easing inflationary pressures,” he added.

The July inflation figure, the highest since December 1981, came on the day the Government announced a cut in the petrol price to RM2.55 a litre from RM2.70 before.

For the first seven months, the CPI is up 4.4% compared with a year earlier.

The index gained 7.7% in June, and the market had expected a 7.8% increase in July.

RAM Holdings Bhd chief economist Dr Yeah Kim Leng believes that inflation, at 8.5%, has peaked, “provided petrol prices are not revised upwards.”

He said the market estimate of an inflation rate of 5.7% for the full year was achievable. “It could even be lower if pump prices are brought down further,” Yeah said.

The Government has said it would review pump prices every month from Sept 1 depending on price fluctuations in the international market. It also said the RON 97 petrol price in the domestic market would be capped at RM2.70 per litre this year.

Yeah said a “small increase” in the overnight policy rate at Bank Negara’s monetary policy meeting on Monday would be appropriate to keep up with the current inflation trend.

“But we will not be surprised if the central bank maintains the rate this Monday, seeing that the global oil price has come off its peak and the pump price has been reduced,” he said.

The last time the central bank raised rates was in April 2006.

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US stocks fall sharply amid financial sector concerns

NEW YORK: Wall Street slid Tuesday as downbeat news from JPMorgan Chase & Co. and other financial companies lifted the market's anxiety about the continuing impact of the credit crisis on the economy.

The Dow Jones industrials fell nearly 140 points.

The latest reminder of continuing troubles for banks and brokerages came when JPMorgan said late Monday it has incurred wider losses in its mortgage holdings so far in the third quarter than in the second quarter.

The second-largest U.S. bank by assets said in a regulatory filing it lost $1.5 billion, after hedges, in its mortgage-backed securities and loans this quarter, compared to $1.1 billion in the second three months of 2008.

The losses were proof to investors that the financial sector's problems appear to be nowhere near a resolution.

Meanwhile, Goldman Sachs Group Inc. fell after several analysts lowered their ratings and earnings estimates for the investment bank.

And UBS AG, Switzerland's largest bank, reported further losses and write-downs of $5.1 billion during the second quarter.

The market's losses were mitigated for part of the session by a drop in the price of oil - an illustration of the ongoing push-and-pull in the market between oil prices and any news about financials.

Oil trading was buffeted by several factors: differing views on whether global demand is falling or rising, and word from BP PLC that it had shut down an oil pipeline that runs through Georgia as a precautionary measure due to the fighting between Georgian and Russian troops.

Light, sweet crude settled down $1.44 at $113.01 a barrel on the New York Mercantile Exchange.

The price of crude has fallen more than $30 from its July 11 high of $147.27, easing concerns on Wall Street about inflation - but on Tuesday, the anxiety over the financial sector overwhelmed any relief about oil prices.

"Some of the big bellwether financial-services companies are precipitating the correction that we're seeing,'' said Phil Orlando, chief equity market strategist at Federated Investors of Tuesday's retreat by stocks.

Still, he said the run-up in stocks since oil began falling last month has made occasional retrenchments not unexpected.

According to preliminary calculations, the Dow fell 139.88, or 1.19 percent, to 11,642.47.

Broader stock indicators also declined.

The Standard & Poor's 500 index fell 15.73, or 1.21 percent, to 1,289.59, and the Nasdaq composite index fell 9.34, or 0.38 percent, to 2,430.61.

Bond prices rose as stocks fell and investors, once again uneasy about the financial sector, when back in search of safer investments.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.91 percent from 4.00 percent late Monday.

The dollar was higher against most other major currencies, while gold prices fell.

A Commerce Department report showed the nation's trade deficit shrank in June, rather than growing as expected.

The trade imbalance dropped 4.1 percent to $56.8 billion in June from a revised May deficit of $59.2 billion, as exports rose to an all-time high.

It was the smallest deficit in three months and was better than the $61.5 billion Wall Street expected.

Ryan Detrick, senior technical strategist at Schaeffer's Investment Research, said any good news of the day was simply overshadowed by the latest concerns about the financial services sector.

Banks and brokerages have taken more than $300 billion of write-downs since the credit crisis began last year.

"The financial worries have just crept back in,'' Detrick said.

"But, given the rally we had last week, we're still holding on if you look at the big picture. We were due for some kind of a break.''

The Dow had gained 350 points over the previous two sessions.

JPMorgan fell $3.90, or 9.3 percent, to $37.99.

The stock plunged in late trading after Ladenburg Thalman analyst Richard X. Bove lowered his earnings estimates for the year.

Goldman Sachs declined $11.21, or 6.3 percent, to $166.79 after the analyst downgrades of some of its ratings.

Wachovia Corp. fell $2.17, or 11.9 percent, to $16.04 after it announced plans to cut 600 more jobs than it previously expected as it tries to slash costs because of losses on mortgage debt.

The bank also said in a quarterly regulatory filing that it has recorded an additional $500 million in legal reserves related to its settlement discussions with regulators concerning the sale of auction-rate securities.

UBS fell $1.34, or 6.2 percent, to $20.35.

The company also said it will separate its divisions such as private banking and investment banking to bolster investor confidence.

Declining issues outnumbered advancers by about 2 to 1 on the New York Stock Exchange, where volume came to 957.3 million shares.

The Russell 2000 index of smaller companies fell 6.12, or 0.81 percent, to 744.94.

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US stocks end higher, extending last week's gains

NEW YORK: US Stocks ended higher Monday but well off their peak after crude oil prices pulled off their lows and the Federal Reserve said more banks are tightening lending standards.

The decline in oil since last month has eased investors' concerns about the drag of rising prices on the economy, but its move off its lowest levels Monday deflated a stock market rally that built upon steep gains last week.

Light, sweet crude fell 75 cents to settle at $114.45 per barrel on the New York Mercantile Exchange after dipping to $112.72, its lowest price since early May.

The Fed's report reminded investors that the U.S. credit situation is still deeply troubled.

The central bank said about 75 percent of the banks it surveyed in July had increased requirements for prime mortgages, up from about 60 percent in April.

The tighter standards can make it more expensive and difficult for borrowing that could stimulate the economy.

Falling oil prices and the continuing problems in the financial sector have competed for Wall Street's attention in recent sessions, with oil sending stocks higher and credit-related news tending to limit or halt the rallies.

Jim Hardesty, president of Hardesty Capital Management in Baltimore, said the decline in oil will take some pressure off the economy.

"We have a speculative bubble in prices that's giving way to what now I think are more moderate levels,'' he said, referring to oil's surge higher this year.

"I think we can look forward to a resumption of an improvement in equity prices based on still-good earnings coming out of many companies.''

The Dow Jones industrial average rose 48.03, or 0.41 percent, to 11,782.35, after being up more than 130 points.

The gains Monday follow the blue chips' 300-point jump Friday.

Broader stock indicators also advanced Monday.

The Standard & Poor's 500 index rose 9.00, or 0.69 percent, to 1,305.32.

The Nasdaq composite index rose 25.85, or 1.07 percent, to 2,439.95, after names like Amazon.com Inc. jumped $7.58, or 9.4 percent, to $88.09 following release of upbeat comments from analysts.

Other consumer discretionary stocks rose as investors saw the drop in oil as likely to leave more cash consumers' wallets.

That's a welcome prospect; consumer spending accounts for more than two-thirds of U.S. economic activity.

Target Corp. rose $2.49, or 5.1 percent, to $51.23, while Starbucks Corp. rose $1.18, or 7.8 percent, to $16.30.

Advancing issues outnumbered decliners by about 5 to 3 on the New York Stock Exchange, where volume came to a light 1.26 billion shares compared with 1.25 billion Friday.

Light trading can exacerbate the market's moves.

The drop in oil prices, which have fallen more than $30 from their July 11 high of $147.27, has alleviated some of Wall Street's worries about inflation and its effect on spending.

Oil traders on Monday appeared to set aside uneasiness about fighting between Russia and Georgia that had raised the possibility of supply disruptions in the region; they focused instead on a rising dollar and a report from China that its crude oil imports fell significantly in July.

Ryan Larson, senior equity trader at Voyageur Asset Management, said the final moves by oil appeared to turn some investors more cautious, as did the Fed report.

"You see a little steam coming out of equities,'' he said, pointing to the effect of oil's partial recovery.

"People are trying to lock in some moves.''

Traders didn't appear surprised that some investors looked to cash in gains.

The jump in stocks Friday led the Dow industrials to a run-up of 3.60 percent for the week.

The Standard & Poor's 500 index advanced 2.86 percent last week and the Nasdaq composite index added 4.46 percent.

It was the best week for the indexes since April.

The dollar, whose recent strength has helped drive oil lower, was mostly higher Monday against other major currencies. Gold prices fell.

Bond prices fell sharply as traders again transferred money to the stock market.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 4.01 percent from 3.94 percent late Friday.

In corporate news, Waste Management Inc. said it was increasing its buyout bid for rival Republic Services by 9 percent to $37 per share.

The nation's largest trash hauler is willing to pay about $6.99 billion for Republic Services, which rejected an offer of $6.19 billion, or $34 a share, in July.

Waste Management rose 10 cents to $36.11, while Republic rose 19 cents to $35.05.

Calpine Corp. rose 61 cents, or 3.8 percent, to $16.60 after the power producer said it swung to a profit in the second-quarter from a loss a year earlier following an increase in electricity rates and lower costs.

The company earned 41 cents per share; analysts expected a profit of 10 cents a share, according to Thomson Financial.

The Russell 2000 index of smaller companies rose 16.76, or 2.28 percent, to 751.06.

Wall Street seemed unfazed by a pullback in China's benchmark Shanghai Composite Index, which fell 5.2 percent Monday after economic figures showed wholesale price inflation jumped to its highest level in 12 years in July.

Elsewhere overseas, Japan's Nikkei stock average rose 1.99 percent.

Britain's FTSE 100 rose 0.96 percent, Germany's DAX index advanced 0.73 percent, and France's CAC-40 rose 1.04 percent.

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Bank Negara to prevent fundamental slowdown

KUALA LUMPUR: Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz says there would be a moderation of economic growth but the central bank will try to prevent the country from slipping into a “fundamental” economic slowdown.

She said that a fundamental economic slowdown would occur when there was an increase in unemployment.

Zeti said several central banks particularly in the developed countries have also highlighted the risk of its deepening economy slowdown.

“The risk of slowing economic growth is real and must taken seriously,” she said after launching the Malaysia International Islamic Financial Centre yesterday.

Zeti expected domestic inflation to moderate by next year, particularly in the second half, as weakening growth rate and recent retraction of commodity prices would have a dampening effect on it.

However, she remained cautious on the “second-round” effects from the June fuel hike.

Inflation jumped to a 26-year high of 7.7% in June when local petrol and diesel prices increased by 41% and 63% respectively.

On the weakening ringgit, Zeti said any intervention that Bank Negara undertook was only to maintain orderly market conditions as this was its priority.

“Bank Negara will not intervene to affect the underlying trend of the domestic currency,” she added.

She said the recent US dollar strength against other major currencies was just a part of the international development, and the movement of the ringgit reflected the movement of other currencies. The local currency fell to its lowest level this year against the greenback last week as the ringgit traded above the 3.30 mark.

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Invisibility cloak one step closer, scientists say

WASHINGTON (Reuters) - Scientists have created two new types of materials that can bend light the wrong way, creating the first step toward an invisibility cloaking device.

One approach uses a type of fishnet of metal layers to reverse the direction of light, while another uses tiny silver wires, both at the nanoscale level.

Both are so-called metamaterials -- artificially engineered structures that have properties not seen in nature, such as negative refractive index.

The two teams were working separately under the direction of Xiang Zhang of the Nanoscale Science and Engineering Center at the University of California, Berkeley with U.S. government funding. One team reported its findings in the journal Science and the other in the journal Nature.

Each new material works to reverse light in limited wavelengths, so no one will be using them to hide buildings from satellites, said Jason Valentine, who worked on one of the projects.

"We are not actually cloaking anything," Valentine said in a telephone interview. "I don't think we have to worry about invisible people walking around any time soon. To be honest, we are just at the beginning of doing anything like that."

Valentine's team made a material that affects light near the visible spectrum, in a region used in fiber optics.

"In naturally occurring material, the index of refraction, a measure of how light bends in a medium, is positive," he said.

"When you see a fish in the water, the fish will appear to be in front of the position it really is. Or if you put a stick in the water, the stick seems to bend away from you."

These are illusions caused by the light bending when it moves between water and air.

NEGATIVE REFRACTION

The negative refraction achieved by the teams at Berkeley would be different.

"Instead of the fish appearing to be slightly ahead of where it is in the water, it would actually appear to be above the water's surface," Valentine said. "It's kind of weird."

For a metamaterial to produce negative refraction, it must have a structural array smaller than the wavelength of the electromagnetic radiation being used. This was done using microwaves in 2006 by David Smith of Duke University in North Carolina and John Pendry of Imperial College London.

Visible light is harder. Some groups managed it with very thin layers, virtually only one atom thick, but these materials were not practical to work with and absorbed a great deal of the light directed at it.

"What we have done is taken that material and made it much thicker," Valentine said.

His team, whose work is reported in Nature, used stacked silver and metal dielectric layers stacked on top of each other and then punched through with holes. "We call it a fishnet," Valentine said.

The other team, reporting in Science, used an oxide template and grew silver nanowires inside porous aluminum oxide at tiny distances apart, smaller than the wavelength of visible light. This material refracts visible light.

Immediate applications might be superior optical devices, Valentine said -- perhaps a microscope that could see a living virus.

"However, cloaking may be something that this material could be used for in the future," he said. "You'd have to wrap whatever you wanted to cloak in the material. It would just send light around. By sending light around the object that is to be cloaked, you don't see it."

Copyright © 2008 Reuters

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BCHB, Bursa lead blue chips higher

KUALA LUMPUR: BCHB and Bursa led blue chips higher in early trade on Monday but overall market sentiment was still cautious after last Friday’s decline and as investors awaited more corporate earnings this month.

At 9.30am, the KLCI was up 3.9 points to 1,124.21. Turnover was 51.48 million shares valued at RM66.13mil.

Light crude oil was trading at US$115.60 while the ringgit continued to weaken to RM3.31 against the greenback.

Japan’s Nikkei 225 surged 1.85% or 244 points to 13,412.42 and Singapore’s Straits Times Index jumped 1.13% to 2,839.19 but Shanghai’s A Share Index fell 0.24% to 2,727.91.

On Bursa Malaysia, OSK Investment Research said it did not expect the KLCI to fall close to 10 points last Friday despite the poor performance of the US market last Thursday.

“However, what is important is that the KLCI was able to sustain a posture at above the key 1,120 level. Anyhow, as long as the 1,120-level is not taken out, the odds are still high that the KLCI could march higher from the current level.

“Meanwhile, our bullish stance is maintained. From the current level, look for an immediate resistance at the 1,148-level followed by the 1,165-level. To the downside, the 1,120 level is now the immediate support followed by the 1,100-level,” it said.

BCHB was among the top gainers, up 15 sen to RM8.75 while Bursa and TM International added 10 sen each to RM6.95 and RM6.45. Up 10 sen also was Genting to RM6. Top Glove advanced eight sen to RM4.10.

MSC tumbled 95 sen to RM6.65 with 3,700 shares done. KFCH and KLK lost 20 sen each to RM6.30 and RM11.80 while Asiatic eased 10 sen to RM5.85 and Sime five sen lower to RM6.95.

Profit taking saw Ann Joo Resources-WB falling 12 sen to RM1.38 and the shares four sen to RM3.64.

BURSA : [Stock Watch] [News]

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Ringgit falls below 3.30 against US dollar

PETALING JAYA: The ringgit fell below 3.30 against the US dollar for the first time in eight months, pressured by foreign sell down on local stocks and bonds.

The ringgit fell as much as 0.7% to 3.309 to the greenback yesterday, and was at 3.3012 at 5pm. At yesterday’s level, the local unit was back to where it was at the start of the year.

Economists expected further pressure on the ringgit, on the increasing likelihood that Bank Negara would keep interest rates at current levels as prices of crude oil and other commodities declined.

The weak ringgit will help local companies boost their export earnings, but make import of food products more expensive.

On Thursday, Bank Negara said the country’s foreign exchange reserves at US$125.1bil as at end-July showed the first monthly decline since August last year.

Late last month, the central bank kept interest rates unchanged, despite faster inflation in June. Meanwhile, on Bursa Malaysia, plantation stocks tumbled as crude palm oil plunged in recent weeks.

Foreign investors own significant chunks in top three plantation stocks Sime Darby Bhd, IOI Corp Bhd and Kuala Lumpur Kepong Bhd. The three planters had lost a combined RM34bil in market value since the start of July.

The KL Composite Index dropped 5.6% during the same period at yesterday’s close of 1,120.31.

“The weakening equity market is expected to weigh down on investors’ sentiment, and hence lead to either lower inflows or outflows of portfolio investment,” CIMB Research’s economist Lee Heng Guie wrote in a note yesterday.

He said the drop in foreign reserves reflected the large outflow of portfolio investments, which offset the continued inflow of export proceeds.

Meanwhile, RHB Research Institute said yesterday the foreign sell-off on Bank Negara’s issued papers and Malaysian government securities was evidenced since May.

“We expect foreign investors to continue unwinding their holdings in fixed income securities, given the ringgit will likely weaken further on the back of a strengthening US dollar,” the firm said.

The US dollar rose against almost all major currencies yesterday. The euro declined against the greenback for a fourth week on rising prospects the European central bank would keep lending rates as growth slows down in the region.

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Bursa Securities reprimands Haisan, KBES, Ta Win and KYM

KUALA LUMPUR: Bursa Malaysia Securities Bhd has publicly reprimanded four companies -- Haisan Resources Bhd, KBES Bhd, Ta Win Holdings Bhd and KYM Holdings Bhd --- for breaching the listing requirements.

The regulator had on Thursday directed the companies to carry out a limited review on their quarterly report submission due to sharp variations in their results.

Bursa Securities said the limited review “must be performed by the company’s external auditors for four quarters commencing from the quarter subsequent to the date of this announcement”.

It said the companies had to ensure that each announcement was “factual, clear, unambiguous, accurate, succinct and contains sufficient information to enable investors to make informed investment decisions”.

On Haisan, it said the fourth quarterly report for the financial year ended Dec 31, 2007 failed to take into account the adjustments as stated in the company’s announcement dated May 6.

Bursa Securities said Haisan reported net profit of RM556,000 in its annual audited accounts for the financial year ended Dec 31, 2007 as compared to an unaudited profit after taxation and minority interest of RM2.42mil in its 4Q report.

“The decrease in profit after taxation and minority interest of RM1.86mil represents a variance of approximately 77%,” it said.

As for KBES, Bursa Securities said the company had in its 4Q report for FY ended Dec 31, 2007 failed to take into account the adjustments as stated in the company’s announcement dated April 28.

The regulator said KBES had reported an audited net loss of RM2.98mil in its annual audited accounts for FY07 as compared to an unaudited net loss of RM1.92mil in its 4Q report.

“The increase in loss after taxation and minority interest of RM1.06mil represents a variance of approximately 55%,” it said.

As for Ta Win, Bursa Securities said the company, had in its 4Q announcement dated Feb 29, had also failed to take into account the adjustments as stated in the company’s announcement dated April 30.

The regulator noted that Ta Win reported an audited net loss of RM8.9mil in its annual audited accounts for FY07 compared to an unaudited net loss of RM6.89mil in its 4Q.

“The increase in loss after taxation and minority interest of RM2mil represents a variance of approximately 29.08%,” it said.

Commenting on KYM, Bursa Securities said the company had, in its announcement dated March 31 regarding its 4Q results ended Jan 31, failed to take into account the adjustments as stated in the announcement dated May30.

KYM reported an audited net loss RM8mil in its annual audited accounts for FY ended Jan 31, as compared to an unaudited net loss of RM4.94mil in its 4Q results. The regulator said the increase in net loss of RM3.06mil represented a variance of about 61.96%.
HAISAN : [Stock Watch] [News]
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Govt and TM likely to seal broadband deal on Aug 14

AFTER over a month's delay, the much awaited signing of the RM11.3bil high-speed broadband (HSBB) agreement between the Government and Telekom Malaysia Bhd (TM) is scheduled on August 14.

Sources said the planning for the signing was well underway and “it is highly unlikely that there will be further delays”.

TM and the Government were originally slated to seal the deal on July 1 but the signing was put on hold, as the Government then had not sorted out where the funding for its portion in HSBB will come from.

“The funding part is resolved now and the Government will fork out RM2.4bil for its part in the project,’’ said a source familiar with the HSBB infrastructure network project.

He did not disclose whether the funding would come from the Ninth Malaysia Plan allocation.

Instead of the Finance Ministry, the Ministry of Energy, Communications & Multimedia (MECC) is expected to sign on behalf of the Government.

Earlier, it was said that the Government, via Finance Ministry, would be involved in the project.

According to the source, this was just a technicality and the Finance Ministry had asked that the MECC to sign on its behalf.

This is also the first time the Government is co-investing in a project where it wants returns, but “details on the quantum of returns is not clearly specified”.

The idea for the HSBB was to boost broadband penetration in the country.

The investment for a nationwide reach of broadband would cost about RM15.2bil, of which the Government had earlier planned to co-invest RM4.5bil last September.

However, the Government decided to scale down the project this year and only work on Zone 1, which covers major cities and towns.

The cost for Zone 1 will be RM11.3bil, and TM was picked as the player to implement the project.

TM is forking out RM8.9bil while the Government about RM2.4bil, thus the need for the signing agreement so that the project can be implemented.

TM had said that it would start to roll out the project six months after the signing of the contract.

However, there are various unresolved issues that needed to be addressed so that the industry could benefit from the project and not TM alone.

So far, players still does not know how much access will be provided to them and at what rates.

The concern is that the lack of transparency would allow TM to muscle its way in the negotiations for network infrastructure usage as has been done in the past.

Whatever the Government or TM does, one must bear in mind that if TM overcharges the industry players, the consumers will then suffer in terms of higher usage charges for broadband services.

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Malaysia set to become a major tuna player in Asia

VIGO (Spain): Malaysian International Tuna Port Sdn Bhd (MITP) has taken another step towards making Malaysia a major tuna player in Asia with the signing of a pact with an influential Spanish seafood industry organisation.

Its Spanish collaborator is the National Fish and Seafood Canners Association (known by its Spanish acronym, Anfaco), which has over 190 member companies.

MITP chief executive director Datuk Annuar Zaini Binyamin said this was a significant move not just for the company but also for the Malaysian seafood industry because of Spain’s leading position in the European Union’s (EU) seafood market.

From left: Datuk Dr Zulkifli Idris, Datuk Annuar Zaini Binyamin and Juan M. Vieites Baptista de Sousa. - Bernama

“The agreement will add another dimension in the cooperation between Spain and Malaysia,” he added after the signing ceremony here on Wednesday. “As the largest seafood producer in Europe, Spain will be a good partner.”

The agreement is for scientific and technological co-operation between MITP and Anfaco’s innovation and technology affiliate, the National Technical Canned Fish Products Centre.

The alliance allows Malaysia to have a better understanding of the EU seafood health standards. In addition, it is an avenue for the Malaysian seafood industry to provide input on the challenges in meeting these standards.

Annuar Zaini said the parties planned to set up a working committee soon to facilitate the implementation of the agreement.

He signed the agreement on behalf of MITP, while Anfaco secretary general Juan M. Vieites Baptista de Sousa was the other signatory. Among the witnesses were Agriculture and Agro-based Industry Ministry secretary-general Datuk Dr Zulkifli Idris and Malaysian Ambassador to Spain Datuk Naimun Ashakli Mohammad.Zulkifli said the agreement had the support of the Malaysian government.

“We are trying to complement the seafood industry in Spain, not compete with it,” he added.

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Axis shares plunge on heavy selling

KUALA LUMPUR: Axis Inc Bhd shares plunged on heavy selling as investors reacted to the company’s failure to meet the deadline to submit audited accounts for the financial year ended March 31.

Coming out of Thursday’s trading suspension yesterday afternoon, the stock dropped to a low of 28 sen in the first half hour and closed at 30.5 sen, down 4.5 sen.

In reply to a Bursa Malaysia query on July 31, Axis directors said its external auditor Messrs Horwath had disclosed in their draft financial statements full details of the material unresolved issues and the amount involved, which included receivables as at March 31, 2008 amounting to about RM105mil.

The amount is a significant increase over the approximate RM11mil outstanding in the previous financial year. Subsequent to the balance sheet date, about RM20mil had been settled by its contract manufacturers, Axis said.

It also said Messrs Horwath were unable to obtain sufficient appropriate audit evidence and explanations to ascertain the basis of the advances made to the contract manufacturers, and whether the advances and settlement were in compliance with the strategic alliance agreement between the parties.

The recoverability of the outstanding balances due from the contract manufacturers in relation to the trade receivables and advances was also in question.

Pending more information and explanation on the above matters, Horwath was unable to complete the audit and form an audit opinion, Axis said.

The company said its board was committed to resolving the issues raised by Horwath. However, the full impact would only be known after the special audit.

An analyst in a bank-backed research house believed the unresolved accounting issues was the main reason for the plunge in Axis’ share price since July 25.

He added that Axis’ involvement in the winding-up of betting operator Global Trader Europe Ltd further fuelled investors’ worries.

Axis’ 2007 annual reports shows about 23.3 million shares or 15.2% of its share base were pledged with Kenanga Capital Sdn Bhd for Saipuddin Lim Abdullah, about 19.5 million shares, or 12.7%, pledged with RHB Capital Bhd for Lee Han Boon, and another 10.6 million shares, or 6.9%, pledged with RHB for Koh Tee Jin.

RHB Research maintained its “underperform” call on the stock as the indicative fair value was unchanged at 24 sen.

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Axis shares plunge on heavy selling

KUALA LUMPUR: Axis Inc Bhd shares plunged on heavy selling as investors reacted to the company’s failure to meet the deadline to submit audited accounts for the financial year ended March 31.

Coming out of Thursday’s trading suspension yesterday afternoon, the stock dropped to a low of 28 sen in the first half hour and closed at 30.5 sen, down 4.5 sen.

In reply to a Bursa Malaysia query on July 31, Axis directors said its external auditor Messrs Horwath had disclosed in their draft financial statements full details of the material unresolved issues and the amount involved, which included receivables as at March 31, 2008 amounting to about RM105mil.

The amount is a significant increase over the approximate RM11mil outstanding in the previous financial year. Subsequent to the balance sheet date, about RM20mil had been settled by its contract manufacturers, Axis said.

It also said Messrs Horwath were unable to obtain sufficient appropriate audit evidence and explanations to ascertain the basis of the advances made to the contract manufacturers, and whether the advances and settlement were in compliance with the strategic alliance agreement between the parties.

The recoverability of the outstanding balances due from the contract manufacturers in relation to the trade receivables and advances was also in question.

Pending more information and explanation on the above matters, Horwath was unable to complete the audit and form an audit opinion, Axis said.

The company said its board was committed to resolving the issues raised by Horwath. However, the full impact would only be known after the special audit.

An analyst in a bank-backed research house believed the unresolved accounting issues was the main reason for the plunge in Axis’ share price since July 25.

He added that Axis’ involvement in the winding-up of betting operator Global Trader Europe Ltd further fuelled investors’ worries.

Axis’ 2007 annual reports shows about 23.3 million shares or 15.2% of its share base were pledged with Kenanga Capital Sdn Bhd for Saipuddin Lim Abdullah, about 19.5 million shares, or 12.7%, pledged with RHB Capital Bhd for Lee Han Boon, and another 10.6 million shares, or 6.9%, pledged with RHB for Koh Tee Jin.

RHB Research maintained its “underperform” call on the stock as the indicative fair value was unchanged at 24 sen.

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