Malaysia expected to back down from Clob share takeover threat

BARRY PORTER in Singapore

THE Malaysian government is today expected to bow to pressure from Singapore and put off its threat to take over M$17 billion of frozen shares once traded in the city state.

However, Malaysian Prime Minister Mahathir Mohamad has warned his government may still do so in the future if the 16-month impasse over the frozen shares is not resolved soon.

"If necessary, we'll take over the shares," Dr Mahathir said yesterday.

Today should have been the deadline for investors who bought Malaysian shares through Singapore's over-the-counter market, Central Limit Order Book International (Clob), to accept one of six proposals to end the deadlock.

However, the vast majority of the 172,000 investors involved have baulked at the heavily discounted prices offered by companies accredited to bulk buy up the shares, frozen in September last year as part of Malaysia's controversial capital controls.

Dr Mahathir yesterday accused Clob investors of "dilly-dallying" and said they "should be happy" to accept the many "reasonable offers" tabled.

The prime minister has justified his decision to ban Malaysian share trading abroad by blaming Clob shareholders for battering the Kuala Lumpur stock market at the height of the region's financial turmoil, an accusation Singapore's monetary authority has vehemently denied.

The Malaysians granted Singapore's Central Depository Pte (CDP) nominee status to hold on to the frozen shares on behalf of their owners, while the issue was resolved.

However, that status was due to expire today, causing much concern. Earlier this week, Malaysian Finance Minister Daim Zainuddin threatened to sequester the shares once the deadline for resolving the issue expired.

However, the Kuala Lumpur Stock Exchange is now expected to extend the CDP's nominee status for the time being. It is not yet clear for how long.

Dr Mahathir yesterday reassured Clob investors the Malaysian government would not seize the frozen shares without some form of compensation.

The Monetary Authority of Singapore has responded by telling Malaysia it had no legal right to transfer the shares to the finance ministry. The Singapore government has mooted taking the dispute to the World Trade Organisation.

Singapore's Straits Times added to the debate yesterday, saying Kuala Lumpur's actions over the shares could infringe WTO rules and hurt its international standing.

"It is not just the Clob shares that are at stake. Malaysia's own reputation also hangs in the balance," the newspaper said in an editorial.

The Securities Investors Association (Singapore), which represents 50,000 of the 172,000 Clob investors in 112 listed Malaysian companies, has called for a staggered release of the frozen shares on to the Kuala Lumpur Stock Exchange over a 12-month period.

It said this would allay Dr Mahathir's fears of triggering a sudden crash in the stock market.

Meanwhile Dec 30 AFP reported that analysts say some foreign funds are awaiting a solution to the dispute before deciding whether to return to Malaysia.

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

Mahathir hit out at the CLOB shareholders for not accepting any of the proposals even though the offer value was much higher compared with when the shares were frozen.

"I think there have been so many different offers made to shareholders. The shareholders, as far as I can see, (would) make as much as 200 percent profit," he said.

"They should be happy to accept any reasonable offer. Apparently, they want maximum benefit although they are responsible practically for destroying our (Kuala Lumpur stock) market," said Mahathir.

"They were selling and lending the shares. This brought down the shares."

Criticising "dilly-dallying" by the shareholders, he said, "They dispute everything. I think that is not right."

Mahathir also said that even if the shares revert to the government, the individual shareholders remain the owners. "We have to redeem or in some way compensate their shares," he added.

David Gerald, president of the Singapore Securities Investors Association which represents 50,000 of the investors, on Tuesday said it might take legal action if the finance ministry took over the shares.

"We will ask Malaysian courts or the World Trade Organisation to decide if they should take our shares," he added.

"But we still believe Malaysia will do the right thing expected of them in dealing with foreign investors. We want an amicable solution. We want to continue to invest in Malaysia."

• Published in the South China Morning Post December 31, 1999.


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