Still CLOBered in Singapore
Asiaweek. May 14,1999
Anger greets a bid for frozen Malaysian shares
MALAYSIAN shares used to be hotly traded in Singapore under a system called the Central Limit Order Book (CLOB). But for eight months they have been frozen solid following Kuala Lumpur's imposition of currency controls. Now a mysterious Singapore businessman wants to break the impasse by buying all the shares for cash, and at a substantial premium to their last traded price. So why is everybody complaining?
"The buyer is offering to purchase the shares at a 45 peercent premium above the September 15, 1998, prices of the shares when CLOB was closed down. This price may be too low," says Dr. P.H.S. Lim of the Malaysian Investors Association in Kuala Lumpur. He has a point. On the day CLOB was closed, the main Kuala Lumpur stock index stood at 262. Since then, it has climbed nearly 160 percent. "Let there be a fair price offered or an open bid," says Lim.
So far there is only one bid on the table. Kuala Lumpur-based Singaporean Akbar Khan is offering $1.53 billion to the holders of the 172,000 frozen CLOB accounts. He is not apologizing for the price. "I am a bulk buyer and I am running the risk of a long exposure to the market," he told the Business Times newspaper in Singapore. A few other ideas have been floated, including placing all CLOB shares in a tradeable closed-end fund. Meanwhile, the shares remain mere pieces of paper.
Akbar's case has not been helped by his sudden appearance. "This deal is extraordinary for the sheer chutzpah of a hitherto unknown businessman emerging from nowhere to make a $1.53 billion offer," the Business Times said. A chartered accountant by training, Akbar runs fashion boutiques in Malaysia for labels such as Hugo Boss. He says financing has been arranged through Malaysian banks. He has reportedly won regulatory approval from Kuala Lumpur for the deal, fanning talk of official support. Singapore media thought he was backed by Malaysian Finance Minister Daim Zainuddin, but Akbar denied that, and Malaysian officials insist other ideas remain welcome.
Underlying the issue is CLOB's odd status. Kuala Lumpur never formally recognized the over-the-counter trade, even though it was a major conduit for bringing Singaporean money into the Malaysian market. A further complication is the huge size of the frozen shares. A messy thaw could devastate prices, while a block sale could transfer controlling stakes in numerous companies. And any solution will affect Malaysia's reputation with investors - already strained by the imposition of capital controls. "The way this is done will affect the credibility of Malaysia as an investment-grade country," says a European brokerage analyst in Kuala Lumpur.