Malaysia gives holders of Clob shares six more months to reach deal

But the Kuala Lumpur Stock Exchange (KLSE) said in a statement June 30 was the final deadline to move the shares -- once traded over-the-counter in Singapore under the Central Limit Order Book (CLOB) scheme -- back to Malaysia.

Otherwise, it said, the shares would be transferred to the control of the Malaysian finance ministry. The frozen shares in Malaysian companies, now worth between three and US$4 billion, are owned by around 172,000 investors, most of them Singaporeans.

The dispute has again strained the often testy relations between Malaysia and Singapore. The announcement of the extension, which followed a week of mixed signals from Kuala Lumpur, was likely to be welcomed there.

The Monetary Authority of Singapore late Tuesday urged Kuala Lumpur to honour agreements between the stock exchanges of the two countries.

Analysts say some foreign funds are awaiting a solution to the dispute before deciding whether to return to Malaysia.

The shares were frozen when Malaysia imposed capital controls in September 1998, banning trading of its securities outside the country.

The mandate of the Singapore stock exchange's Central Depository as a nominee holder of the shares was due to expire Dec 31.

On Dec 28 Malaysia's Finance Minister Daim Zainuddin indicated his ministry might take control of the shares after that.

Prime Minister Mahathir Mohamad said Dec 30 Malaysia may extend the deadline. But he criticised "dilly-dallying" by shareholders faced with several suggested alternative proposals to move the shares back to Kuala Lumpur.

The KLSE said it was extending the Central Depository's nominee status for "a final period" of six months but warned the finance ministry would take control of the securities unless the matter was settled by then.

It said the extension meant the Singapore body would have been given 19 months to settle the issue.

The Kuala Lumpur exchange insisted it was not its job to find a solution. It was for the Singapore stock exchange and the shareholders to accept or reject proposals from the private sector.

But the KLSE said any proposals must comply with Malaysian securities laws, must not disrupt the Malaysian market and must make Malaysia the main market for trading Malaysian securities.

There have been fears that a flood of shares would drive down the market.

The KLSE said CLOB, "an unauthorised market dealing in Malaysian securities, was unilaterally set up, operated and eventually closed" by the Singapore stock exchange.

Thus it was "the duty and responsibility" of the exchange and its Central Depository to resolve the problem of their CLOB investors.

Singapore investors have rejected offers from several Malaysian companies to mop up the CLOB shares.

Key points are how quickly to repatriate the shares and how much shareholders should have to pay in fees to do so.