Analysts: Consumers still cautious about spending

Petaling Jaya: Malaysians are likely to change their lifestyle and spending patterns given the uncertain impact of the global economic slowdown.

Analysts said consumers would likely remain cautious next year.

OSK Research said although the Kuala Lumpur Composite Index had reflected the US financial turmoil and the global economic slowdown, the full impact of a slowing economy had yet to hit the man on the street.

“We believe the true impact will hit Malaysian shores by January as exporters clear off their previous order books and new orders are significantly cut back,” OSK said, adding that domestic spending would take a turn for the worse after the festive season.

The research house said after months of weaker spending power due to high inflation, the capacity of Malaysians to cope with reduced income in 2009 would be eroded, resulting in a cutback in spending on leisure travel and imported high-end products.

As households scrutinised spending patterns, OSK Research said there would still be winners.

“On the flipside, automakers of affordable cars, providers of staple food products, domestic travel and domestic apparel brands are likely to benefit from downtrading by the consumers,” the research house said, adding that it had identified seven sectors — auto and autoparts, breweries, broadcast media, food, retail, transport and tourism, and tobacco — which it expected to be the beneficiaries.

“Given the rather gloomy outlook for next year, during which total industry volume for the auto sector is expected to fall 11% with a massive pullback on the commercial and high-end passenger vehicle segment, we expect consumer demand to shift to lower-priced fuel-efficient vehicles,” OSK said.

Companies involved in selling necessities targeted at middle to low-income earners will be the beneficiaries while low-cost staple food manufacturers will gain due to the affordablity of their products.

OSK said operators of toll roads, domestic flights and flights within Asean would also likely be beneficiaries as more consumers would opt for domestic holidays or shorter flights to save on the still high fuel surcharge.

However, it warned that these beneficiaries of downtrading were medium-term investing ideas and were not entirely suitable for the current volatile market conditions.

“We want to advise investors to keep a close watch on these companies and look for the right entry levels come the first quarter of 2009 as stability returns to the market,” OSK said.

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The 2009 world outlook by region

By ELAINE KURTENBACH

SHANGHAI, China (AP) - The debate is over. Slumping exports and surging unemployment, even in powerhouse China, have ended any question over whether Asia could shrug off the pain inflicted by the global financial crisis.

But while the outlook for the first half of the year is gloomy, economists say the latter half of the year promises at least some recovery.

China's 2008 is ending with a whimper, with fourth quarter growth forecast to drop to as low as 2 percent from nearly 12 percent in 2007 as exports stall.

India, Asia's other emerging market powerhouse, likewise is losing momentum, with exports contracting in October for the first time in seven years.

The deep slump in global demand for autos and other bread-and-butter exports has once again ensnared Japan, the world's second largest economy, in recession, crippling another key market for exports from the rest of Asia.

Singapore, Taiwan and Hong Kong have likewise succumbed.

Despite the gloom, Asia's banks and other financial institutions have had less exposure to the risky subprime mortgages causing havoc in the United States and Europe.

They also are better prepared to weather the storm thanks to the shake-up they got during the regional economic crisis a decade ago.

Closer trade ties in the region will also help, Subir Gokarn, Asia-Pacific chief economist for Standard & Poors, said in a recent conference call.

"This is not to say that interregional trade will offset the export slowdown, but it does provide a bit of a counteraction,'' he said.

The World Bank's latest forecast puts growth for East Asia, excluding Japan, at 5.3 percent in 2009, down from about 7 percent this year.

As Chinese leaders channel billions of dollars into potentially job-creating public works programs, the crisis could bottom out in early 2009, said Frank Gong, an economist with investment bank J.P. Morgan.

The recession comes at a time when China and many Asian countries are struggling over how to bridge the divide between those who prospered during the boom years and those still struggling to escape poverty.

But the region, including even politically volatile Thailand, can expect slower growth, not a contraction, economists say. "2009 will not be an outstanding year by any means, but it will reflect the region's resilience,'' Gokarn said.

LATIN AMERICA

Global downturn slows half-decade growth spurt in Latin America

By MAYRA PERTOSSI

BUENOS AIRES, Argentina (AP) - Global financial turmoil is ending a half-decade of more than 5 percent growth in Latin America, as prices for its commodity exports sink and foreign investors sell off assets to cover losses at home.

The global downturn has slashed demand for oil, copper, iron ore, grains and other regional exports, narrowing trade surpluses, while credit for farmers and small businessmen has tightened amid the global crunch, boosting unemployment and poverty.

Economic growth could slow to 2 percent across the region in 2009, its lowest level in years, said Claudio Loser, a former director at the International Monetary Fund.

Latin America's two largest economies, Brazil and Mexico, have seen growth forecasts more than halved, while analysts worry that Argentina, one of the world's top-five exporters of wheat, corn, soy and beef won't be able to service payments on $20 billion in debt next year as income from export taxes stalls.

Venezuela and Ecuador are especially vulnerable.

Their reliance on oil exports to finance as much as half of public spending has left them particularly exposed to volatile oil prices - now down some 70 percent from their July high, said Paulo Vieira da Cunha, economic analyst with Tandem Global Partners in New York.

Remittances - money sent home by immigrants, many of whom work in the United States - will also tank as the U.S. sheds jobs, slowing growth in Mexico, Colombia, Peru, Ecuador, the Dominican Republic, Haiti, El Salvador, Guatemala and Honduras.

Still, years of gains have armed Latin America to weather the global downturn better than other regions, as governments have paid down debts and amassed foreign currency reserves and rainy day funds they can now tap to boost their slowing economies.

Chile, for example, has saved more than $21 billion in copper revenue, allowing President Michelle Bachelet to pump at least $2 billion into the economy in stimulus spending this year. Copper makes up 40 percent of Chilean exports.

Those policies have helped the region defend itself from the downturn and ensure that it "will probably avoid the recession'' now plaguing the U.S., Moody's Economy.com wrote in a note to investors.

EURO-ZONE--AFRICA

EU cushions slowdown with economy stimulus plan

BRUSSELS, Belgium (AP) - EU leaders have approved an economic stimulus package of around 200 billion euros ($270 billion) to ward off recession in the European Union.

The euro-area economy entered into a recession when growth in both the second and third quarters shrank as investments plunged and spending froze.

Banks have cut their forecast for euro zone's economy in 2009 to between no growth and minus 1 percent, even with the assumption that the year's second half will see a very gradual recovery as global demand for euro goods picks up, led by emerging countries and oil exporters.

The euro economy is home to 320 million people and accounts for more than 15 percent of the world's gross domestic product.

The European Central Bank, which has been urged to loosen lending and stoke growth, cut interest rates to 2.5 percent from 3.25 percent early this month, the biggest cut in its 10-year history.

Economists say the cautious ECB should go further and cut below 2 percent in 2009.

In Sub-Saharan Africa, growth expanded to 5.4 percent in 2008, and is expected to still be 4.6 percent in 2009.

But the contribution of net exports to African GDP growth may fall.

Higher food and fuel prices also have led to growing poverty, raising the risk of social unrest, economists said.

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Oil falls to 3-year low in Asia

SINGAPORE: Oil prices fell to a 3-year low below US$49 a barrel Friday in Asia as plunging stock markets, driven down by more bad U.S. economic news, battered investor confidence.

Light, sweet crude for January delivery was down 95 cents to $48.47 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore.

The December contract, which expired Thursday, fell overnight by $4.00 to settle at $49.62 after sliding to $48.50, the lowest level since May 18, 2005.

"Sentiment is totally bearish, parallel to the stock market,'' said Gerard Rigby, an energy analyst at Fuel First Consulting in Sydney.

"Everyone is just doom and gloom and not seeing any light on the horizon for the next 12 months.''

Traders are worried that a global recession will undermine energy demand. Already, oil prices have tumbled by two-thirds from their peak of nearly $150 a barrel in mid-July.

The Dow Jones industrial average fell 5.6 percent Thursday to its lowest level since March 2003 after the Labor Department said new applications for jobless benefits exceeded analyst estimates and rose to the highest level of claims since July 1992.

The S&P 500 index fell 6.7 percent Thursday to an 11-year low. The S&P 500 has dropped more than 52 percent below its October 2007 record, making this the second-biggest bear market on record, exceeded only by the 83 percent drop between 1930 and 1932.

Asian stock markets followed their U.S. counterparts down Friday, but they pared losses as trading progressed. Japan's benchmark Nikkei index was down 1.2 percent, Hong Kong's Hang Seng index was down 1.4 percent. South Korea's key index was up 0.4 percent.

"$50 was a psychological support level,'' Rigby said.

"Since we haven't traded this low for so long, it's hard to find a new support level.''

The Organization of Petroleum Exporting Countries, which accounts for about 40 percent of global supply, may cut production before its next official meeting on Dec. 17, Rigby said. OPEC President Chakib Khelil has signaled the group may announce output reductions at the meeting, but some members, such as Iran, have called for earlier cuts.

OPEC lowered production quotas by 1.5 million barrels a day last month.

"Their revenues are dropping so much, I think OPEC will have to call an extraordinary meeting and cut quotas to try to support the market,'' Rigby said.

"Their last cut had zero impact on the market.''

In other Nymex trading, gasoline futures fell 1.0 cent to 99.7 cents a gallon.

Heating oil gained 2.14 cents to $1.65 a gallon while natural gas for December delivery slid 3.8 cents to $6.28 per 1,000 cubic feet.

In London, December Brent crude fell 68 cents to $47.40 on the ICE Futures exchange.

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MISC, Genting lift KLCI out of red

KUALA LUMPUR: Some buying interest in MISC and Genting nudged the 100-stock KL Composite Index into positive zone but trading was relatively thin and the broader market still weak.

At 12.30pm, the KLCI was up just 0.69 point to 882.34. Turnover was 281 million shares valued at RM261mil. Decliners led advancers 232 to 132 while 164 counters were unchanged.

Singapore’s Straits Times Index was 0.29% or 5.11 points lower at 1,754.03 but Hong Kong’s Hang Seng Index added 0.41% to 13,598.84.

Light crude oil was trading at US$56.08, down 96 cents while crude palm oil prices fell RM35 to RM1,425.

MISC rose 20 sen to RM8.50 while QSR, YTL, KFCH and Genting added 10 sen each to RM2.37, RM6.45, RM6.90 and RM4.54 respectively.

KNM was the most active with 40.9 million shares traded. It eased 0.5 sen to 67 sen.

Meico was the top loser, down 21.5 sen to 26 sen with 5,000 shares done. Shell lost 15 sen to RM9.65, United Plantations and Sime Darby shed 10 sen each to RM10.40 and RM6.25.

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Stocks slightly higher in cautious trade

KUALA LUMPUR: Stocks were slightly higher in early trade on Monday on some mild buying interest in stocks like KL Kepong, WCT and Muhibbah but the general mood was still cautious.

At 9.30am, the KL Composite Index was up 1.71 points to 895.66. Turnover was 125.13 million shares valued at RM117.75. There were 151 gainers, 54 losers and 112 counters unchanged.

Japan’s Nikkei 225 rose 4.98% or 427.77 points to 9,010.77, Singapore’s Straits Times Index added 0.04% to 1,864.21 while Shanghai’s A Share Index opened 2.27% higher at 1,877.73.

South Korea’s Kospi rose 0.19% to 1,136.65. Fitch Ratings had lowered the country’s rating outlook to “Negative” from “Stable” on concerns that the de-leveraging of the banking system might contribute to an erosion of the sovereign's external credit strengths.

On Sunday, China unveiled a US$586bil stimulus package to prevent the world's fourth-largest economy against the global financial crisis.

The Chinese government approved a plan to invest the money in infrastructure and social welfare by the end of 2010.

Oil prices jumped US$2.96 to US$64 while the ringgit was quoted at RM3.5345 to the US dollar as at 9.30am.

HwangDBS Vickers Research said it expected the KLCI to swing sideways with a modest upward bias.

It expected the KLCI to recover further, extending its cumulative gain of 92.7 points or 11.6% from a recent trough of 801.27, while wobbling to search for a stable footing simultaneously.

“This is not to say that there is no more tangible downside risk on our local bourse – as our medium-term bearish stance remains – though trading-oriented investors may be in the mood to take the risk for potential short-term gains,” it said.

The return of trading activity in speculative penny stocks, assuming it persisted, would hold up the overall market volume ahead, it added.

KLK rose 15 sen to RM8.35 while WCT added 13 sen to RM1.84, Parkson 12 sen to RM3.56 while Muhibbah added nine sen to RM1.15.

Genting added six sen to RM4.56, Sime Darby and Bursa five sen higher to RM6.25 and RM5.80.

IOI Corp rose four sen to RM3.16 in active trade, MRCB added three sen to 85.5 sen while KNM added 1.5 sen to 67 sen.

TMI was among the losers, down 14 sen to RM4.54 while Tanjong and Maybank fell 10 sen each to RM12.50 and RM5.55 respectively. BCHB lost five sen to RM6.10 and TM fours en to RM3.30.

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US stocks rise after two days of heavy selling

NEW YORK: Buyers returned to Wall Street Friday after two days of heavy losses, mindful of the economy's growing problems but attracted by stocks' lower prices.

Analysts said the advance, which also came amid relief that a bad report on unemployment wasn't worse and followed dour third-quarter reports from Ford and General Motors, was to be expected as Wall Street experiences a rocky recovery from October's devastating selling.

The major indexes jumped more than 2 percent, including the Dow Jones industrial average, which rose 250 points in light trading.

For the week, the Dow and broader benchmarks like the Standard & Poor's 500 index lost about 4 percent after surging 10 percent or more last week.

The market briefly came off its highest levels of the session after President-elect Obama reiterated that there is a great deal of hard work to be done to restore the economy to health.

Investors had optimistically sent prices higher, only to temporarily pull back when Obama underscored what they already know: that the economy's problems won't be easily solved.

The Dow rose 248.02, or 2.85 percent, to 8,943.81.

The broader S&P 500 index added 25.87, or 2.86 percent, to 930.75, and the Nasdaq composite index rose 38.70, or 2.41 percent, to 1,647.40.

The Russell 2000 index of smaller companies rose 9.95, or 2.01 percent, to 505.79.

George Shipp, chief investment officer at Scott & Stringfellow in Richmond, Virginia, said Obama appeared to be trying to telegraph to the market not to expect too much immediately.

Obama, noting that he has until January before taking office, said he will work to support an economic stimulus plan and will seek ideas for helping the auto industry.

"My expectation is that he lowers the bar and buys the time,'' Shipp said.

"Certainly there is no reason to create any undue expectations right now.''

That afternoon blip upward, retreat and move higher was a mini-version of the market's performance over the past two weeks, with investors turning upbeat, then realizing there was little basis in reality for their resurgent confidence, then changing their minds again.

Hank Smith, chief investment officer at Haverford Investments said the market's turns aren't a surprise.

"I think it's absolutely part of the bottoming process,'' Smith said.

"The Oct. 10 low has been tested again a number of times.''

The blue chips hit an intraday low of 7,882.51 on Oct. 10.

Friday's economic and corporate news reminded the market that the country could be in for a deep and protracted recession.

The Labor Department said the nation's employers cut 240,000 jobs in October, hurtling the U.S. unemployment rate to a 14-year high of 6.5 percent.

The market had expected employers to cut 200,000 jobs and for the unemployment rate to rise 6.3 percent.

Meanwhile, Ford Motor Co. reported a $129 million third-quarter loss and announced plans to cut more than 2,000 additional white-collar jobs.

General Motors Corp. said it lost $2.5 billion in the quarter and warned that it could run out of cash in 2009.

The struggling automaker also said it has suspended talks to acquire Chrysler.

Although the day's news was on its face worse than expected, investors were drawn by prices beaten down the past two sessions and some relief that the reports weren't more grim.

"We're coming off of a very oversold market that had already braced itself for bad news out of Detroit and certainly bad economic data in terms of the labor report,'' said Peter Cardillo, chief market economist at Avalon Partners.

The market is following the pattern of volatility that analysts warned would prevail for some time to come.

Obama's election to the White House was preceded by a big rally, during which the benchmark Standard & Poor's 500 index surged 18.3 percent in six sessions up through Tuesday.

This was followed by a two-day loss of about 10 percent in the major indexes, including a 929-point drop in the Dow, as investors turned their focus once more to the economy's woes.

"There are three factors that are driving this market: psychological, fundamental and technical,'' Smith said.

"The psychological is fear and panic. We've certainly seen that.''

The fundamental factor is investors don't know exactly how the current credit crisis is going to affect the economy.

And the technical factor that is playing in to the market is the forced selling from hedge funds and mutual funds that have to raise cash for redemptions, Smith said.

Nov. 15 is the cutoff for shareholders to notify fund managers of their intent to cash out investments before year-end, which means a sudden influx of "sell'' orders could force funds into dumping more investments.

Analysts expect this to continue to add to the volatility in the market.

Advancing issues outnumbered decliners by more than 2 to 1 on the New York Stock Exchange, where volume came to a light 1.23 billion shares.

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Asian markets lower on poorer Wall Street performance

PETALING JAYA: The benchmark index halted a two-day winning streak by opening lower Wednesday.

At 10am, the Kuala Lumpur Composite Index (KLCI) was down 5.2 points, or 0.6%, at 913 points. Losers led gainers 40 to 191, while 115 counters were unchanged.

Some 58.6 million shares changed hands, worth over RM99.4mil.

Regional bourses were also trading weaker Wednesday in line with the poorer performance on Wall Street Tuesday.

Nikkei 225 dropped 2.8%, Kospi fell 1.5%, Hang Seng Index declined 1.1% while Singapore Straits Times Index was down by 2%.

Sentiment turned cautious as several US companies missed earnings estimate in their financial results released, and a similar trend is expected in Asia and the rest of the world.

The Dow Jones Industrial Average fell 2.5% while crude oil for November delivery settled at US$70.89 per barrel.

The KLCI was dragged by selling in blue chips including IOI Corp Bhd, MISC Bhd and Public Bank, which dropped 10 sen each to RM3.10, RM8.50 and RM8.80 respectively. Sime Darby was also down by 5 sen to RM6.30 in anticipation of weaker crude palm oil prices.

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Asian markets rally, KLCI up nearly 19pts

KUALA LUMPUR: Asian markets rallied in early trade on Tuesday, as investors rushed back into equities, spurred by massive gains on Wall Street following the massive rescue plan for the European and US financial institutions.

At 9.30am, the KL Composite Index was up 18.58 points or 1.95% to 969.34. Turnover was 136.7 million shares valued at RM222.4mil. There were 327 gainers, 38 losers while 86 counters were unchanged.

Japan’s Nikkei 225 led the rally, surging 13.08% or 1,082 points to 9,359.08, Singapore’s Straits Times Index jumped 6.29% to 2,206.98 while Shanghai’s A Share Index opened 3.32% higher at 2,250.23.

Light crude oil rose US$1.86 to US$83.05 while the ringgit strengthened to RM3.484 against the US dollar.

Stocks on Wall Streets rallied last night as investors reacted positively to the US Government’s plan to buy stakes in banks and Federal Reserve’s US$700bil rescue plan for the troubled financial system.

Most of the European equity bourses also rebounded after the countries leaders promised to inject funds into the financial market, as the British Government pledged to pump US$63bil into the Royal Bank of Scotland, HBOS and Lloyds TSB.

“Following these positive vibes, investors in the regional bourses in Asia, including Malaysia may be cheered up and motivated to pick up their investment appetite again, especially on blue chips stocks which have been severely battered in the past one week,” said HwangDBS Vickers Research.

DiGi, Shell and Public Bank foreign rose 40 sen each to RM22.80, RM10.10 and RM8.80 respectively while Tanjong and PPB added 30 sen each to RM12.70 and RM8.20. BCHB and LPI gained 25 sen each to RM7.65 and RM9.55.

KNM was the most active with 16.3 million shares done, rising two sen to 98.5 sen. IOI Corp rose 12 sen to RM3.62 while AMMB gained five sen to RM2.57.

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Oil rebounds in Asia Monday on Europe bank rescue plan

SINGAPORE: Oil prices rebounded from a 13-month low to rise above US$80 a barrel Monday in Asia on expectations that a pledge by European countries to keep banks from collapsing may stabilize a tumultuous global financial system.

Light, sweet crude for November delivery was up US$2.76 to US$80.46 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore.

The contract fell Friday $8.89 to $77.70, the lowest price since Sept. 10, 2007.

"The turnaround in oil today is due primarily to the European bank rescue plan,'' said Victor Shum, an energy analyst at consultancy Purvin & Gertz in Singapore.

"It's a shot in the arm, though it's too early to know if this will restore confidence to the credit markets.''

At an emergency summit of leaders of the 15 euro-zone countries in Paris on Sunday, European governments agreed to guarantee new bank debt until the end of 2009, allowed governments to help banks by buying preferred shares, and vowed to rescue important failing banks through emergency recapitalization.

Individual governments will announce how they will implement the measures.

The plan follows Britain's US$88 billion plan to partly nationalize major banks and promise to guarantee a further US$438 billion of loans to shore up the banking sector.

U.S. lawmakers Sunday urged quick action by President George W. Bush on measures to make direct purchases of bank stock to help unlock lending.

Treasury Secretary Henry Paulson has indicated the administration will use part of the recent US$700 billion bailout Bush signed Oct. 3 to have the government take ownership stakes in banks.

The administration has not indicated when it would announce its next steps.

"These rescue plans will not prevent a global economic slowdown, but they may ease the pain,'' Shum said.

"I expect further downward volatility in the oil market, though talk of US$50 or US$60 is extreme.''

Oil prices have fallen about 45 percent since soaring to a record $147.27 on July 11.

Investors are watching for signs that the Organization of Petroleum Exporting Countries may cut production at an extraordinary meeting in Vienna next month.

Iranian Oil Minister Gholam Hossein Nozari on Saturday called for stability in the oil market, saying the biggest challenge now was a decline in oil demand because of a global economic recession.

"There won't likely be any overt cuts, but there could be an informal tweaking of production that could provide support for prices,'' Shum said.

"It's politically unacceptable for OPEC to make cuts in the middle of a global deceleration.''

In other Nymex trading, heating oil futures rose 6.02 cents to US$2.27 a gallon, while gasoline prices gained 5.60 cents to US$1.86 a gallon. Natural gas for November delivery rose 1.5 cents to US$6.55 per 1,000 cubic feet (28 cubic meters).

In London, November Brent crude rose US$2.18 to US$76.27 a barrel on the ICE Futures exchange.

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Asian markets fall on US economy worries

KUALA LUMPUR: Asian markets started the new week on a weak note on Monday, with the local bourse also slightly lower in cautious trade as investors worried about the deteriorating fundamentals of the world’s largest economy despite the Congress approval for the US$700bil bailout.

At 9.30am, the KL Composite Index was down 3.19 points to 1,013.51. Turnover was 28.99 million shares valued at RM55.28mil. There were 54 gainers, 112 losers and 80 counters unchanged.

Asian markets fell with Shanghai’s A Share Index opening, after a week-long break, to down 2.36% or nearly 60 points to 2,351.912.

Japan’s Nikkei 225 fell 3.5% to 10,554.95, Singapore’s Straits Times Index 2.4% lower to 2,242.09 while South Korea’s Kospi declined 3.54% to 1,369.45. Light crude oil fell US$2 to US$91.88 per barrel.

HwangDBS Vickers Research said despite showing resilience of late, we expect Malaysian stocks to drift downward ahead. It said the KLCI would probably back off from 1,020, which was the immediate resistance hurdle, although the KLCI might remain above the 1,000 threshold for the time being.

“This comes as investors’ focus in the US has shifted from the huge bailout package (which was finally passed by the lawmakers on Friday) to assessing the deteriorating fundamentals of the world’s largest economy. Reflecting the low confidence, major equity indices on Wall Street were down between 1.4% and 1.5% at the closing bell last Friday,” it said.

Plantation stocks fell, with Kulim down 30 sen to RM5.30, KL Kepong sliding 25 sen to RM8.80 and Tradewinds Plantations 11 sen to RM1.68 while United Plantations declined 10 sen to RM11.10 and Asiatic eight sen to RM4.40.

Puncak gave up part of its gains, down 14 sen to RM3.24 while Bursa, EON Cap and Tanjong fell 10 sen each to RM6.35, RM4 and RM13.40 respectively.

IOI Corp was the most active, down six sen to RM4.40. AirAsia rose three sen to RM1,.26 on news report that it could be privatised.

Kim Loong-WA rose 11 sen to 88 sen, Hai-O eight sen to RM3.54 while Hwa Tai added five sen to 50 sen.

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Rejection of US bailout proposal hits world stock markets

PETALING JAYA: For those who predicted that the era of American dominance in the economic and political spheres was waning with the rise of China and India, the stream of bad news from Wall Street and its negative impact on major markets must surely come as a reality check.

It has put to rest ideas about decoupling — that emerging markets won’t be affected by a downturn in the United States. The ideas were bandied about by analysts and economists until the first half of the year when it became obvious a combination of US financial woes and high oil prices had begun to negatively impact investors’ confidence.

This has been made worse by the rejection by US lawmakers of a US$700bil bailout package for the country’s ailing financial services industry on Monday. The news caused the Dow Jones Industrial Average to plunge to a 21-year low of 10,365.45, losing 777.98 points or 6.98%, and wiping out US$1.2 trillion in value.

Standard & Poor’s North America Equity Research chief technical strategist Mark Arbeter said in a report that the market was close in time to “a major market bottom” although the level at which it would bottom out was still debatable.

Meanwhile, Citigroup Inc analyst Yiping Huang said the fading hopes for a speedy rescue plan would accelerate the downward spiral of the financial markets, not only in the United States but also in other countries as well.

“Rejection of the bailout plan in the US could set into new motion the vicious cycle between deleveraging and falling asset prices,” he said, adding that there was a possibility the Federal Reserve might shift its focus to an interest rate cut with the European Central Bank and the Bank of England following suit.

Asian bourses, which were closed when the measure failed to pass after a four-hour debate in the US House of Representatives, began yesterday’s trading firmly lower and were largely down except for Hong Kong’s Hang Seng Index, which was up 135.53 points, or 0.76%, at 18,016.21.

Tokyo’s Nikkei 225 closed down 483.75 points, or 4.12%, to 11,259.86, Singapore’s Straits Times Index lost 2.43 points, or 0.10%, to 2,358.91 and Seoul’s Kospi Index fell 8.30 points, or 0.57%, to 1,448.06.

Singapore’s CapitaLand Ltd saw its share price drop 18% to S$2.66 in intraday trade on fears the continuing crisis in the United States might affect housing demand. It was the biggest one-day drop since Jan 9, 1998 for the South-East Asia’s largest property developer. City Developments Ltd, the island state’s number two developer, fell 15% to S$7.33, according to Bloomberg.

Manufacturers of big-ticket consumer items also felt the impact from the US with Japanese vehicle makers’ share prices tumbling. Toyota Motor Corp fell 4.6% to 4,380 yen while Honda Motor Co and Nissan Motor Co lost 3.7% and 4% respectively to 3,090 yen and 697 yen.

European bourses, which were down on Monday, pared their losses yesterday following speculation the US government’s bailout plan might be revived. Dexia SA, a Brussels-based firm that is the largest lender to local governments, saw its share price rise 15% in intraday trade as the Belgian and French governments put together a 6.4 billion euros rescue plan to help the company cope with the financial turmoil.

This followed a string of bailouts in Europe with Britain’s Bradford & Bingley Plc nationalised, Germany’s Hypo Real Estate Holding AG given a 35 billion euros loan guarantee to fend off bankruptcy and a 11.2 billion euros lifeline thrown to Fortis by the governments of Belgium, Luxembourg and The Netherlands.

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KLCI opens below 1,000 level

KUALA LUMPUR: Blue chips fell sharply in early trade on Tuesday, sending the KL Composite Index below the key 1,000 level as sentiment was battered by weak regional markets and the tumble on Wall Street.

At 9.05am, the KLCI was down 23.86 points or 2.34% to 995.86. Turnover was 22.31 million shares valued at RM31.27mil. There were only nine gainers, 195 losers and 34 counters unchanged.

Major Asian markets which were opened for trading also fell sharply after the US Congress rejected the US$700bil bailout plan.

US markets plunged as the House rejected, by a vote of 228 to 205, the US$700bil measure to authorise the biggest government intervention in the markets since the Great Depression.

The Dow Jones Industrial Average fell 778 points, or 6.98% to 10,365, the biggest point drop ever. The Standard & Poor's 500 Index fell 8.4%, the most since Oct 26, 1987.

Japan’s Nikkei 225 fell 4.78% or 561.07 points to 11,182.54, South Korea’s Kospi skidded 3.69% 1,402.65 while Singapore’s Straits Times Index fell 4.64% to 2,251.71.

Light crude oil fell 29 cents US$96.09 per barrel.

At Bursa Malaysia, Nestle fell RM1 to RM26, KL Kepong 45 sen to RM9.35 while down 40 sen each were Tanjong, BCHB and MISC foreign to RM13, RM7.35 and RM7.75 respectively. Genting and DiGi lost 30 sen each to RM5.05 and RM22.10 while Bursa Malaysia slipped 25 sen to RM6.15.

IOI Corp fell 24 sen to RM4.12 and Gamuda 13 sen to RM2.04.

Meanwhile, TH Group bucked the weak market, rising 12 sen to 69.5 sen after Tung Hup Holdings Sdn Bhd, which holds 53.26% of TH Group, proposed a capital repayment of 75 sen per TH Group share under its move to take it private.

CNI rose five sen to 33 sen while MAA added 2.5 sen to 62 sen while QSR edged up one sen to RM2.33.

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Deal reached on financial markets bailout

WASHINGTON: Congressional leaders and the Bush administration have reached a tentative deal on a bailout of imperiled financial markets that would cost taxpayers hundreds of billions of dollars.

The House could vote on it Sunday and the Senate on Monday. House Speaker Nancy Pelosi announced the accord just after midnight Saturday and said it still has to be put on paper.

Treasury Secretary Henry Paulson talked of finalising the deal but added: “I think we’re there.”

The plan would spend up to US$700bil, most of it on buying deeply devalued mortgages from the housing market’s collapse and other bad loans held by tottering banks and other investors.

The aim is to prevent credit from drying up and causing a meltdown of the US economy

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KL, Asia stocks extend gains on proposed US bailout

KUALA LUMPUR: The Malaysian and Asian markets extended gains Monday after the U.S. government proposed a US$700 billion plan to solve the world financial crisis by rescuing banks from billions of dollars in risky mortgage debt.

The benchmark Kuala Lumpur Composite Index stood at 1029.16 up 3.46 points or 0.34% at 11.56 am (0356gmt).

The losers at 236 led the gainers at 226. There were 198 counters unchanged and 2,509,618 lots were traded.

In Japan, the Nikkei 225 index was 1.7 percent higher at 12,123.54 points by midday, while Hong Kong's Hang Seng index added 1.1 percent.

The Shanghai Index has gained 132.39 points to 2,207.48 by midday Monday.

It had surged 9.5 percent on Friday - its biggest one-day percentage gain ever.

Several major banks have jumped by the 10 percent daily limit, including ICBC, Bank of China and Construction Bank of China.

The advances came after an another extraordinary rally on Wall Street on Friday.

Australia's S&P/ASX 200 jumped 4 percent, buoyed by new rules banning all short selling following similar actions by regulators in the U.S. and Britain.

Asian markets had rallied Friday on news Washington was likely to announce a bailout plan, calming investors worried that losses from bad bets on mortgages could bring about the collapse of more companies, straining an already weakened financial system and global economy.

On Sunday the Bush administration continued to lobby lawmakers for authority to use US$700 billion to buy up a mountain of bad debt at the heart of the crisis.

While the proposed bailout lifted sentiment for the time being, there were still a number of uncertainties about the plan and the general health of financial firms that could further unsettle markets in the coming days, an analyst said.

"This should stem the bleeding, but the patient is still very fragile,'' said Thomas Lam, a senior economist at the United Overseas Bank in Singapore.

"The list of uncertainties is pretty long.'' In mainland China, the stocks gained on strong buying of financial shares after the government announced several moves to support the market, including plans to buy shares in major state-owned banks.

The Dow Jones industrials soared about 370 points, or 3.35 percent, to 11,388.44, giving them a gain of about 780 over two days.

In Japan, banking giant Mitsubishi UFJ Financial Group Inc. climbed more than 5 percent, while leading Australian firm Macquarie Group Ltd. surged 8.5 percent.

Industrial & Commercial Bank of China Ltd, or ICBC, the country's biggest lender, was 2.5 percent higher in Hong Kong trading.

Light, sweet crude was exchanging hands at US$104.40 a barrel in Asian trading on the New York Mercantile Exchange, down about 15 cents.

The contract soared US$6.67 on Friday.

In currencies, the dollar fell to 106.51 yen, while the euro rose to US$1.4519.

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Markets fall on US financial worries

KUALA LUMPUR: Asian markets fell in the morning session on Monday as investors worried about the US financial health, especially after Lehman Brothers filed for bankruptcy.

At Bursa Malaysia, declining stocks beat advancers nearly six to one as political concerns further weighed down sentiment.

At 12.30pm, the KLCI had fallen 15.86 points or 1.52% to 1,028.17. Turnover was 126.92mil shares valued at RM250.13mil. There were 66 gainers, 385 losers while 149 counters were unchanged.

Asian markets fell, with Taiwan’s Weighted Index down 250.12 points or 3.96% to 6,060.56, Singapore’s Straits Times Index 2.91% lower at 2,495.84 and Thailand’s SET 1.25% lower at 646.13.

Light crude oil fell US$2.12 to US$99.06 while crude palm oil (CPO) futures fell RM71 to RM2,309.

At Bursa Malaysia, selling on Tenaga continued after the government said last Thursday it had put off the power purchase agreement talks with independent power producers. Tenaga fell 40 sen to RM6.80.

Plantation-linked counters fell, with Kulim down 50 sen to RM5.40, KL Kepong 30 sen lower at RM10.10, Kim Loong-WA 29 sen to 71 sen while Chin Tek lost 20 sen to RM6.15 and Glenealy 18 sen to RM3.72. BLD Plantations declined 16 sen to RM3.72.

Heavyweight plantation stock IOI Corp lost 10 sen to RM4.28 and it was the most active with 6.99 million shares. Sime Darby eased 15 sen to RM5.95.

Perwaja continued its descent, down 11 sen to RM1.56 and Kinsteel 4.5 sen lower at 68 sen.

M3Nergy rose 19 sen to RM1.15 in active trade while MISC added 10 sen to RM8.40 and Sindora eight sen to RM2.04.

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Markets fall on US financial worries

KUALA LUMPUR: Asian markets fell in the morning session on Monday as investors worried about the US financial health, especially after Lehman Brothers filed for bankruptcy.

At Bursa Malaysia, declining stocks beat advancers nearly six to one as political concerns further weighed down sentiment.

At 12.30pm, the KLCI had fallen 15.86 points or 1.52% to 1,028.17. Turnover was 126.92mil shares valued at RM250.13mil. There were 66 gainers, 385 losers while 149 counters were unchanged.

Asian markets fell, with Taiwan’s Weighted Index down 250.12 points or 3.96% to 6,060.56, Singapore’s Straits Times Index 2.91% lower at 2,495.84 and Thailand’s SET 1.25% lower at 646.13.

Light crude oil fell US$2.12 to US$99.06 while crude palm oil (CPO) futures fell RM71 to RM2,309.

At Bursa Malaysia, selling on Tenaga continued after the government said last Thursday it had put off the power purchase agreement talks with independent power producers. Tenaga fell 40 sen to RM6.80.

Plantation-linked counters fell, with Kulim down 50 sen to RM5.40, KL Kepong 30 sen lower at RM10.10, Kim Loong-WA 29 sen to 71 sen while Chin Tek lost 20 sen to RM6.15 and Glenealy 18 sen to RM3.72. BLD Plantations declined 16 sen to RM3.72.

Heavyweight plantation stock IOI Corp lost 10 sen to RM4.28 and it was the most active with 6.99 million shares. Sime Darby eased 15 sen to RM5.95.

Perwaja continued its descent, down 11 sen to RM1.56 and Kinsteel 4.5 sen lower at 68 sen.

M3Nergy rose 19 sen to RM1.15 in active trade while MISC added 10 sen to RM8.40 and Sindora eight sen to RM2.04.

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Pollution and global warming very serious in the next 10 years

SINGAPORE: A global policy framework for renewable energy is needed in the world today and sustainable initiatives that focus on carbon tax should be developed.

This is necessary as over the next 10 years pollution and global warming are going to be very rapid.

“If nothing is done, they will kill our world,’’ Suzlon Energy chairman and managing director Tulsi Tanti said at the Forbes Global CEO Conference yesterday.

A carbon tax is an environmental tax on emission of carbon dioxide and other greenhouse gases.

But to develop renewable energy there is also an issue of supply and demand and, for now, nuclear and solar energy has failed to become a fast enough alternative.

Renewable energy is an alternative in view of the higher cost of oil and fossil fuels. The development of resources, innovation and technology are, therefore, vital for adoption of renewable energy.

Tanti said Malaysia should develop alternative sources of wind and solar energy.

“There is some potential but the Government has to do wind mapping before it can be implemented,’’ he said.

Solar and wind can make up to 20% of alternative energy sources in the world and the investment of wind turbines is US$1mil per kilowatt hour.

“No doubt the pace of growth in renewable energy has accelerated the past three years but it would take 15 years go put in these systems before we can see any shift,’’ SMR CEO Geoffrey P. Cowley said.

Imposing a feed-in-tariff to accelerate alternative energy was also not viable as consumers would not pay more for green energy, said Khosla Ventures operating partner Ford Tamer.

Suzlon may be one of the leaders in wind power but its turbines have cracked and the company faces some technical issues. To this Tanti said the issue was being handled and should to be seen as a failure.

“It is a normal phase of research and development. The company has set aside US$30mil to rectify the problem which involves 400 machines. Suzlon is also investing US$1bil over the next five years in technology investment to further improve cost and product enhancement,” Tanti added.

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More broadband proposals surface

PETALING JAYA: Last year cable manufacturer Optical Communication Engineering Sdn Bhd (OCE) submitted a concept paper to the Government, suggesting a larger part of the existing infrastructure be used to roll out high-speed broadband (HSBB) in Peninsular Malaysia at a price tag of RM3bil.

OCE believed that a large part of the existing fibre infrastructure could be put to better use and help the country save billions of ringgit.

The price quoted was based on estimates that nearly half the equipment needed would be supplied by the company’s plant. The RM3bil did not include last-mile connectivity.

While OCE was in the midst of talks, the Government went ahead to announce that Telekom Malaysia Bhd (TM) would undertake the HSBB. This was done in September 2007 and it was via direct selection with no tender bid called.

OCE chief executive officer Robin Wong, when contacted, confirmed that such a paper was submitted.

“We are still waiting for a response from the relevant authorities. Our concept is about rolling out 3,000 points in the peninsula, each point able to link 1,000 to 8,000 customers,” he told StarBiz.

Today, Wong is still interested in participating in the building of a HSBB network.

He is not alone. Of late, many more proposals have sprung up despite TM being scheduled to sign the agreement (after two postponements) with the Government on Sept 16.

Two other hopeful parties are High Speed Broadband Sdn Bhd (HSBT), with a privately funded proposal to link 2.5 million lines at RM18bil, and Dr Mohamed Awang Lah, the CEO of Jaring, with his own proposal to wire up five million premises at RM5bil.

HBST was given a chance, which it bypassed, but now wants another shot.

TM’s proposal is to roll out HSBB to 1.3 million premises at RM11.3bil (from RM15.2bil earlier) and the Government will fork out RM2.4bil for the project.

“With a number of parties interested in playing a role and contributing to the social and economic development of the nation, the Government should perhaps give due consideration, open and objective hearing to their proposals.

“Why shut them out and painstakingly try to craft or pull out answers as if from the magician’s hat in support of the incumbent?” asked an industry expert.

Another expert suggested that it was about time the “Government reviews the whole process that was originally planned by the Malaysian Communications & Multimedia Commission (MCMC) – the open bidding process.

“The MCMC’s process of bidding by consultants in early 2007 was intercepted by TM’s own appointed consultant and that is why MCMC had to abort the exercise.

“The exercise was to come up with a plan for national broadband implementation for tendering out to licencees to submit their proposals. With abundant alternative offerings, perhaps it is a good time to revert to such process.”

All these parties believe there is room for a second network, which should be based on a open-access concept, versus TM’s HSBB privately-owned network, which observers say will offer limited access to other players.

“In a big country there can be multiple backbones, but we are a small country. There should be a common backbone which offers fair and equitable access to all players. The owners of the backbone should not compete at the service level,” Mohamed said.

Since StarBiz carried his story on Thursday on the RM5bil proposal, he said several service providers had voiced their interest.

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US stocks plummet

NEW YORK: Dejected investors sent stocks plunging Thursday, hurtling the Dow Jones industrials down more than 340 points after retailers and the government added to a mountain of bad economic news and devastated hopes for a late-year recovery.

The market was already nervous as it waited for the government to release its August employment report on Friday.

So news from the major U.S. retailers that shoppers curtailed their spending last month due to higher gas and food prices came as a heavy blow.

Wal-Mart Stores Inc., the world's largest retailer, beat expectations because of its big discounts, but many teen retailers and luxury chains did poorly, a sign that consumers are spending mostly on essentials and putting discretionary buying on hold.

Meanwhile, the Labor Department said new applications for unemployment insurance rose by 15,000 last week from the previous week.

That broadly missed expectations for a fourth-straight week of declines, heightening worries that the average American - already feeling the effects of the weak housing market - will have even less means to spend.

Furthermore, if the job market keeps deteriorating, it is tough for Wall Street to see a rebound in sight for the economy's biggest culprit: the tumbling housing market.

"You have to have a paycheck to pay that mortgage,'' said Craig Peckham, market strategist at Jefferies & Co.

The numbers released Thursday were a sign that despite some upbeat reports over the past month, the economy remains deeply troubled.

Investors are not expecting any promising news in the August jobs report, particularly after the ADP National

Employment Report said that private sector employment decreased in August by 33,000.

Economists are predicting the government will report the eighth straight monthly payrolls drop, and a rise in the unemployment rate.

The market was so disheartened that it showed little reaction when the Institute for Supply Management said the service sector grew unexpectedly in August for the first time in three months as new orders increased and inflation moderated.

The August reading of 50.6 was higher than the 50.0 expected, and the reading of 49.2 in July; but the sector's edging above the threshold between contraction and expansion was hardly a sign of a robust economy.

An economic recovery appears to be far off to investors - and with the Dow down more than 15 percent for the year so far, they don't appear to be holding out for a significant upturn in stocks, either.

"We're seeing nothing but sellers,'' said Ted Oberhaus, director of equity trading at Lord, Abbett & Co.

"In a bear market, you sort of really don't need an excuse to sell.''

The Dow fell 344.65, or 2.99 percent, to 11,188.23.

It was the worst drop for the blue-chip index since June 26, when it fell more than 358 points, or 3.03 percent.

Broader indexes also tumbled.

The Standard & Poor's 500 index fell 38.15, or 2.99 percent, to 1,236.83.

The Nasdaq composite index dropped 74.69, or 3.20 percent, to 2,259.04.

All three indexes moved back into bear market territory, defined as a 20 percent drop from a recent peak.

The indexes were at highs, including a record 14,198.09 for the Dow.

As investors fled stocks, they turned to the safety of government bonds, sending Treasury prices higher.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.63 percent from 3.70 percent late Wednesday.

Not even another drop in oil could console investors.

After the government reported a lower-than-expected drop in U.S. gasoline and crude supplies, light sweet crude fell $1.46 to settle at $107.89 a barrel on the New York Mercantile Exchange.

Crude is about $30 below its July 11 high of $147.27. Gold prices also slid Thursday.

Toll Brothers Inc. CEO Robert Toll said he is seeing signs the housing market is stabilizing, but Ara Hovnanian - CEO of Hovnanian Enterprises Inc. - said he sees no evidence yet of a market bottom.

The stock market appeared to agree with the latter sentiment on Thursday, sending homebuilder stocks sharply lower.

Toll Brothers performed better than its peers, even after posting a third-quarter loss; its shares rose 27 cents to $25.07.

But shares of Hovnanian, which on Wednesday reported a quarterly loss, sank $1.35, or 17.4 percent, to $6.40. Pulte Homes Inc. fell 86 cents, or 5.8 percent, to $12.05, and KB Home fell $1.22, or 5.7 percent, to $20.11.

The financial sector performed poorly on Thursday as well, particular after bond fund manager Bill Gross wrote in a commentary on his firm's Web site that the U.S. Treasury needs to provide funding to mortgage financiers Fannie Mae and Freddie Mac.

Freddie shares fell 30 cents, or 5.6 percent, to $5.08, and Fannie shares fell 65 cents, or 8.9 percent, to $6.67.

The biggest decliners among the 30 Dow components were three financial stocks: Bank of America Corp., which fell $2.36, or 7.2 percent, to $30.60; Citigroup Inc., which fell $1.31, or 6.7 percent, to $28.30; and American International Group Inc., which fell $1.36, or 6 percent, to $21.22.

Wal-Mart's stock ended down only a penny at $59.78, after it said sales of groceries and back-to-school products helped its August same-store sales rise 3 percent, above expectations.

But the discount chain's success was seen as the corollary of a cash-strapped consumer, and other retailers fell.

JCPenney Co. fell $2.07, or 5 percent, to $39.57, while Gap Inc. fell 83 cents, or 4.2 percent, to $19.14.

Wall Street found no solace in tumbling oil prices - if anything, the drop in commodities weakened the market further by sending the stocks of energy and mining companies lower.

The Russell 2000 index of smaller companies fell 23.29, or 3.14 percent, to 718.62.

Declining issues outpaced advancers by about 5 to 1 on the New York Stock Exchange, where volume came to 1.30 billion shares.
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Oil steady in Asia but risks seen in new storms

KUALA LUMPUR: Oil prices hovered around US$111 a barrel Tuesday in Asia as the threat of Hurricane Gustav dissipated but traders predicted further risks with new storms on the radar and concerns over slowing demand.

Crude oil prices tumbled Monday as Gustav weakened more than expected and appeared to have caused little damage in New Orleans and surrounding areas.

There was some disruption to oil supplies as oil companies shut down production and evacuated facilities ahead of the storm.

Altogether, about 2.4 million barrels of refining capacity had been halted, roughly 15 percent of the U.S. total, according to figures from Platts, the energy information arm of McGraw-Hill Cos.

The Gulf Coast is home to nearly half of U.S. refining capacity.

It could be a day or more before oil and natural gas companies can assess the damage to their drilling and refining installations. Louisiana Gov. Bobby Jindal said as much as 20 percent of oil and gas production that was stopped because of Gustav could be restored by this weekend, stressing that it was a rough estimate.

Light, sweet crude for October delivery stood at US$111.10 a barrel in Asian electronic trading on the New York Mercantile Exchange late Tuesday morning in Singapore.

On Monday, when U.S. trading was closed for Labor Day, the contract had plunged US$4.34 to US$111.12 a barrel in electronic trading from Friday's close of US$115.46 a barrel.

While a weaker-than-expected Gustav, which was downgraded to a tropical storm as it crossed central Louisiana, alleviated fears of a fuel shortage, traders turned their attention to other storms brewing in the region.

Hurricane Hanna was predicted to come ashore in Georgia and South Carolina late in the week, and Tropical Storm Ike formed late Monday in the Caribbean.

Ike was still about 1,400 miles (2,250 kilometers) out in the Atlantic Ocean, but was expected to become a hurricane in the next 36 hours as it approached the Bahamas.

"September is the peak of the Atlantic hurricane season. After Gustav, there are two more now on the radar screen. The storms are likely to provide some upside risks to the oil futures market,'' said Victor Shum, energy analyst with consultancy Purvin & Gertz in Singapore.

Shum said the market appear oversold and there may be potential upside when U.S. trading resumes Tuesday.

Any further dips to oil pricing may be curtailed by the Organization of Petroleum Exporting Countries, which has indicated it may take action to defend the US$100 a barrel level when it meets Sept. 9, he said.

"There are conflicting factors. The market continues to be weighed down by worries of a global economic downturn and slowing oil demand in developing markets, but action by OPEC and supply side concerns will put a backstop to any sharp price drop,'' Shum added.

Australia's BHP Billiton Ltd, which has an interest in eight projects in the Gulf, said Monday it had shut down production and evacuated personnel from its operations.

Royal Dutch Shell PLC, BP PLC and Transocean Inc. have also evacuated employees from rigs in the Gulf region.

In other Nymex trading, heating oil futures fell 10.10 cents to $3.0900 a gallon, while gasoline prices lost 10.42 cents to $2.7500 a gallon.

Natural gas for October delivery fell 39.1 cents to $7.552 per 1,000 cubic feet.

In London, October Brent crude was up 34 cents at $109.75 a barrel on the ICE Futures exchange.

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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]

MSC : [Stock Watch] [News]

COMMERZ : [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]
KBES : [Stock Watch] [News]
TAWIN : [Stock Watch] [News]
KYM : [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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Al Rajhi Bank buys i-City offices for RM95m

KUALA LUMPUR: Al Rajhi Bank (Malaysia) Bhd made its first foray into Malaysia’s real estate investment by proposing to acquire 36 office suites at i-City Cybercentre 1 in Shah Alam from I-Bhd for RM95mil.

I-Bhd announced Monday that both parties had signed a sale and purchase agreement for the bank to purchase the 36 units at i-City -- a RM2bil integrated commercial development on 72-acres of freehold land along the Federal Highway in Section 7, Shah Alam.

Al Rajhi Bank (Malaysia) chief executive officer Ahmed Rehman said this investment was a strategic decision as the bank was transforming itself to become a banking technology partner for customers, particularly with the launch of its full-fledged cash management platform.

i-City is designed as a fully integrated township, comprising a shopping mall, corporate towers and offices, cybercentre office suites, data-centres and innovation centre, hotels and serviced apartments.

I-Bhd director Eu Hong Chew said while the attractive selling price of i-City set a role model and new benchmark for the Shah Alam township as well as for the western side of Klang Valley, there were still tremendous opportunities for capital enhancement and appreciation.

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Dominica invests in geothermal energy

ROSEAU, Dominica (AP) - The tiny Caribbean island of Dominica has signed an agreement with West Indies Power Holdings for the exploration of geothermal energy.

Officials with the Nevis-based company say it will take 18 months and cost US$4 million to dig wells up to 6,000 feet (1,800 meters) deep just south of the island. They hope to find hot water and convert it to steam so it can be used to generate electricity.

The project's second phase includes construction of a 15-megawatt plant that will cost US$45 million and take more than one year to build.

Former acting Attorney General Bernard Wiltshire said Saturday that the project will generate additional revenue for Dominica. Officials plan to sell excess power to Martinique and Guadeloupe. - AP

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Govt urged to reduce sales tax on plastics

IPOH: The Malaysian Plastics Manufacturers Association wants the Government to reduce the sales tax on all plastic finished products from the current 10%.

Its president Lim Kok Boon said the sales tax paid by consumers now had doubled from four years ago.

“The drastic increase in the selling price of plastic finished products has resulted in a decrease in demand by 30%," he told reporters here on Tuesday.

The sales tax reduction would also assist in stabilising demand for plastic products, he added.

He said the price of plastic resin had more than doubled over the last four years.

“The price of plastic resin in 2004 was US$700 (RM2,270) per ton and it is now US$2,000 (RM6,486) per ton,” said Lim.

The increase in price of resin, compounded by hikes in petrol prices and electricity tariffs, had made plastic products more expensive, he said.

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Market down in early trade, oil US$130

KUALA LUMPUR: Blue chips fell in early trade Friday as investors avoided most equities on concerns about the current political situation, rising inflation and slowing economic growth, despite the fact that oil had fallen to US$130 per barrel.

The KL Composite Index fell 2.22 points to 1,118.95. Turnover was 24.22 million shares valued at RM60.14mil. There were 107 gainers, 65 losers while 102 counters were unchanged.

Asian markets fared better. Shanghai’s A Share Index rose 1.73% or 48.7 points to 2,864.73, Singapore’s Straits Times Index added 0.54% to 2,879.7 and the Nikkei 225 0.38% higher at 12,937.19.

The top loser was E&O-LA which tumbled 72 sen to RM1.70 but with 1,000 units done.

The decline in crude oil prices and weaker crude palm oil prices dragged plantations down with KL Kepong falling 40 sen to RM14.80, IOI Corp and Kulim 30 sen each to RM5.80 and RM8 while Kulim-WB fell 40 sen to RM5.60. Batu Kawan, Far East and Asiatic gave up 15 sen each to RM9.60, RM7.30 and RM6.60.

Public Bank foreign fell 10 sen to RM10.40 but the local shares rose 10 sen to RM10.40.

Tanjong added 20 sen to RM12.40, while Hong Leong Bank added 15 sen to RM5.65, and IOI Properties 14 sen to RM4.86.

AirAsia rose two sen to 91.5 sen in active trade.

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Asian, European markets tumble as worries mount over US financial woes

LONDON: Asian and European stock markets fell sharply Tuesday as investor confidence in the U.S. financial system eroded further despite a government-backed plan to help beleaguered mortgage financiers Fannie Mae and Freddie Mac.

Financials were hit particularly hard as investors worried that trouble in the U.S. markets would spill over to Asia and Europe.

By afternoon in Europe, Britain's FTSE 100 had fallen 2.55 percent to 5,165.20, Germany's DAX lost 2.60 percent at 6,039.20 and France's CAC-40 retreated 2.18 percent to 4,052.28.

Fears of yet more bank losses in Europe weighed on stocks. Several major banks have written off billions and had to raise more capital.

"We have got results coming out later in the week and there are worries there are going to be more write-downs,'' said Lawrence Peterman, investment director at Eden Financial in London.

Official figures showing inflation in Britain hit a higher-than-expected 3.8 percent in June, up from 3.3 percent in May, was also having an effect, Peterman said.

In Asia, every major index suffered declines, with Hong Kong's Hang Seng Index dropping more than 3.8 percent and Taiwan's benchmark losing over 4.5 percent. In Tokyo, the Nikkei 225 index dropped nearly 2 percent to close at 12,754.56.

Share prices on Bursa Malaysia closed lower in cautious trading as investors continued selling shares in selected counters, especially finance and plantation stocks.

Investors remained guarded in the wake of weak overnight performance on Wall Street and other regional markets as worries raised with the continued fallout from the US sub-prime mortgage market crisis.

Major blue chips like Sime Darby, IOI Corp, Tenaga and Maybank yielded to selling pressure.

In Japan, traders were rattled by a local business newspaper report that the country's top three banks hold a combined 4.7 trillion yen (US$44 billion) in Fannie Mae and Freddie Mac debt.

Another newspaper report unnerved Taiwan's market with news that at least two leading financial institutions have invested in the mortgage giants, and the country's central bank may also have purchased their bonds.

In China, rumours were circulating that the Chinese government had also invested in Fannie and Freddie bonds.

The two government-chartered companies received a boost Sunday when the US central bank and Treasury Department promised to step in with short-term funding and other aid should mortgage losses mount. Together, the companies hold or back about half the outstanding mortgages in the United States.

A sell-off of regional banks overnight on Wall Street, as well as fears that other American banks might face difficulties ahead, only added to the unease. On Monday, the Dow Jones industrial average fell 45.35, or 0.41 percent, to 11,055.19 after spiking nearly 140 points in early trading.

"Investors are quite concerned we could be heading toward a meltdown in the equities market if there's no rebuilding in confidence, especially in the U.S.,'' said Alex Tang, head of research at Core Pacific-Yamaichi in Hong Kong.

In Hong Kong, the blue-chip Hang Seng Index plunged almost 840 points to 21,174.77 _ its lowest close in nearly four months.

China's biggest lender, ICBC, dove nearly 5.2 percent, and HSBC lost more than 3 percent. Heavyweight China Life Insurance slid 5.3 percent.

In mainland China, the benchmark Shanghai Composite Index fell 3.4 percent to close at 2779.45.

The drop was sharpest for real estate developers, banks and insurers. Among financial companies, China Life and Ping An Insurance both tanked 6 percent. Midsize lender Pudong Development Bank Ltd. dropped 7.1 percent.

The government is due to release closely watched inflation data Thursday, which could add to pressure for an interest rate hike. Analysts expect a decline from May's 7.7 percent but expect the rate to stay above the government's 4.8 percent target for the year.

Elsewhere, South Korea's benchmark slid 3.2 percent, India's Sensex was down 4.6 percent in late trade and Australia's main index lost 2.1 percent.- AP

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