| Financial
Times June 20, 2004 By John Burton in Singapore THE Singapore and Kuala Lumpur stock exchanges said they expected to form a cross-trading arrangement by the end of 2005, which could boost business for south-east Asia's two biggest bourses. The plan, first disclosed in the FT, has received the "in-principle support of their respective regulatory authorities to work jointly on this trading link", the two exchanges said. Investors in Singapore and Malaysia would be able to trade electronically shares listed on each other's markets. The exchanges are also exploring derivatives trading links and the sharing of information technology services such as data centres and back-up facilities. An alliance between the Singapore Exchange (SGX) and Bursa Malaysia, which have similar market capitalisations, would re-establish links disrupted by the 1997-98 Asian financial crisis. Before 1998, Singapore investors were able to trade Malaysian shares locally on an over-the-counter market called the Central Limit Order Book (Clob). But the Clob market collapsed in 1998 when Malaysia, which did not recognise it, imposed capital controls. The move trapped billions of dollars in Malaysian shares owned by Singaporean investors, who suffered losses until Malaysia agreed to a staggered release of repatriated portfolio capital in 2001. The new alliance is seen by Malaysia as an effort to attract new funds from Singapore investors, who have become cautious in buying Malaysian shares. "With an officially sanctioned linkage, investor interests are protected as they are effectively trading in the home market," said Yusli Mohamed Yusoff, chief executive of Bursa Malaysia. The new link could also boost trading volume on the SGX since Malaysian equities accounted for up to half of its turnover in the 1990s. "This is the preferred alliance model as investors are able to enjoy the aggregated liquidity in the home market," said Hsieh Fu Hua, chief executive of SGX With most local companies cash-rich, the SGX has sought to increase turnover through links with other regional bourses and attracting initial public offerings from China and elsewhere. The link would be similar to SGX's alliance with the Australian Stock
Exchange. The SGX is also discussing a link with the Philippine Stock Exchange.
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