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been withdrawn.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.