KL to 'fine tune' tough capital ruling
KL to 'fine tune' tough capital ruling
KUALA LUMPUR (AFP): Prime Minister Mahathir Mohamad Friday assured international fund managers that Malaysia may fine tune the present tough exchange control regulations introduced last September.
Mahathir said however the present capital control regulations would be maintained for the time being, the official Bernama news agency reported, citing fund managers.
Mahathir, who is also the finance minister, met 13 fund managers in a "confidence-boosting" meeting from Singapore and Hong Kong at a closed-door briefing organized by Saloman Smith Barney, Malaysia's financial advisor.
Among the major international fund managers present were Morgan Grenfell, Rothchilds, HSBC Asset Management, Invesco Asia Ltd, Aberdeen, UOB-OSK Asset Management, Mercury, Schroeders, Henderson and Allianz.
Malaysia announced the exchange controls on Sept. 1, a day after the central bank governor and his deputy stood down and a day before finance minister Anwar Ibrahim was dismissed.
Under the new foreign exchange regime, the ringgit is fixed at 3.8 to the dollar and the currency's external convertibility has been withdrawn.
During the hour-long session, fund managers had enquired if the one-year moratorium, which Malaysia imposed on the foreign holding of Malaysian shares and transfer of funds from September 1 this year, would be lifted.
The regulation requires foreign investors to lock in capital in Malaysia for at least one year from that date before it is repatriated.
In the meeting, the fund managers expressed concern the prolongation of the ruling would have an adverse effect on fresh capital investment.
A fund manager from Hong Kong said: "Investors are looking for rules that are simple and stable, and a market that is transparent."
He added that the Kuala Lumpur Stock Exchange (KLSE) at present was deemed as a "illiquid" market by foreign portfolio fund managers.
A "illiquid" market is defined as a stock market in which investors are not able to take out their money within 10 days and in such markets fund managers are only allowed to invest up to 15 percent.
The Hong Kong fund manager who refused to be identified said he hoped there would be a change for the better so long term portfolio capital would flow back into the bourse after the 12- month moratorium period.
The ruling, he said, had discouraged the inflow of fresh money and if the situation was still the same after September 1999, fund managers could be compelled to stay out of the market.
"Malaysia has also been taken out of the Morgan Stanley Composite Index (MSCI) and the International Finance Corporation Index, two important indices which foreign fund managers use as a benchmark for trading," he added.
Economists have predicted that the controls will lead to a black market in foreign currencies in Malaysia.
In an effort to deter currency smuggling, the central bank has already announced plans to withdraw from circulation high- denomination notes of 1,000 ringgit (US$263) and 500 ringgit.