S'pore, Malaysia to allow cross-border stock trading
S'pore, Malaysia to allow cross-border stock trading
Associated Press, Singapore
The stock exchanges in Malaysia and Singapore announced plans on Friday to link their markets, letting each country trade shares in the other.
The tie-up - which should be in place by the end of next year - is the latest sign that improved ties between the neighbors are helping boost business links.
Relations have been warming since last November, when Abdullah Ahmad Badawi replaced the acerbic Mahathir Mohamad as Malaysia's prime minister.
Abdullah has since worked hard to build ties between the two, which were briefly united in the 1960s but split amid political bickering and have since had an often-fractious relationship.
"We expect the linkage to contribute to greater liquidity in our market, hence benefiting all players," said Yusli Mohamed Yusoff, chief executive of Bursa Malaysia.
Liquidity refers to share turnover. Investors prefer more liquid markets, in which they can buy and sell shares with greater ease.
When the tie-up is in place, brokers in one country will be able to directly place orders for shares in the other.
The exchanges said co-operation may in turn be extended to include a trading link for derivatives, and the joint hosting of technology and back-up equipment. Derivatives are complex financial instruments.
The Singapore exchange already has a similar two-way trading tie-up with its counterpart in Australia, which covers shares in the largest companies. But it has not yet proved a big draw for investors in either country.
Malaysian shares may prove more popular. Singapore investors used to trade Malaysian equities in Singapore over a so-called over-the-counter market known as the Central Limit Order Book, or CLOB.
The market - which was never recognized by the Malaysian authorities - was frozen in 1998 when Malaysia imposed capital controls during the regional economic crisis.
The freeze was one of the many thorny issues that have soured relations between the Southeast Asian city-state and Malaysia when Mahathir was at the helm.
Last month, Abdullah agreed that ties were improving: "The comfort level has gone up," he told the Far Eastern Economic Review magazine.