Malaysia, Singapore share row needs govt intervention

Malaysia, Singapore share row needs govt intervention

KUALA LUMPUR (Reuters): A row over frozen Malaysian shares
once traded in Singapore is getting pushed into the growing list
of unresolved bilateral issues between Kuala Lumpur and the
island republic.

Analysts said government intervention was needed to unlock the
shares of Singapore investors after they rejected an offer from a
Kuala Lumpur-based businessman to buy them out at deep discounts
to current market prices.

For the moment, the two governments are taking completely
different approaches in resolving the issue which has frozen
shares of 172,000 Singapore investors worth US$2.8 billion in 112
Malaysian corporations.

Kuala Lumpur is saying it is a private sector matter and, at
best, between the stock exchanges of the two countries, while the
Singapore government has said it will help its investors in
finding a solution, but will not fund any buyouts.

"It originally was a dispute just between the stock exchanges,
but I think it has now assumed the proportions of a diplomatic
row," said Bhanu Baweja, economist with economic think-tank
I.D.E.A. in Singapore.

"While Malaysia is saying that it's Singapore's problem,
that's not entirely true because these are investors who have
invested in Malaysian companies directly. Therefore it's not only
a Singapore problem," he said.

Singapore investors were stuck with the shares after Malaysia
imposed capital controls last September and declared the Central
Limit Order Book (CLOB) over-the-counter market, where the
Malaysian shares were traded, illegal.

Under pressure from angry investors and probably fearing a
legal backlash, the Stock Exchange of Singapore (SES) has since
then unsuccessfully tried to restore trading in the shares by
transferring them to the Kuala Lumpur Stock Exchange (KLSE).

The simmering issue erupted into a heated debate last week
after Singaporean businessman Akbar Khan, a permanent resident of
Malaysia, offered to buy the shares at discounts of up to 85
percent to current market prices.

The sense of urgency created by Khan's offer, which has
Malaysian regulatory approval, is giving way to the realization
that the proposal is probably only an opening gambit.

But many believe that a revised offer from Khan would not be
much better and, therefore, the issue needs a political
resolution.

Singapore Deputy Prime Minister Lee Hsien Loong told his
country's parliament that Malaysia had rejected a proposal to
include the CLOB issue in the bilateral package awaiting
resolution between the two countries' leaders.

Ties between the neighbors have been strained over the last
year over issues such as the supply of water to Singapore, a
Malaysian decision to restrict Singapore's access to its airspace
and the location of a railway customs and immigration operations.

"I think it is going to be linked to other items in the
bilateral package, then we may find EPF (Employees Provident
Fund) and other such funds taking over the shares," said the head
of a futures brokerage in Kuala Lumpur.

Analysts also said that Kuala Lumpur had little to worry about
even if all CLOB shares came into the market. In terms of
capitalization, they said, CLOB makes up only about 2.5 to three
percent of KLSE's capitalization.