KUALA LUMPUR, Feb 1 (AFP) - Hopes faded Tuesday for an early end to a dispute over frozen shares worth billions of US dollars which has strained relations between Singapore and Malaysia.

The Singapore stock exchange described as "misleading" a Malaysian account of a meeting it held Monday with the Kuala Lumpur Stock Exchange (KLSE).And David Gerald, a representative of the mainly Singaporean shareholders whose holdings have been frozen, accused the Malaysian exchange of threatening investors.

"There have been bankruptcies. Pensioners have lost all their savings. They (the KLSE) are playing with human lives and miseries," he told AFP.

The shares, now worth an estimated 17 billion ringgit (4.86 billion US dollars), were frozen when Malaysia imposed capital controls in September 1998 during the Asian financial crisis, banning trading of its listed shares outside the country.

Previously they had been traded in an over-the-counter market in Singapore under the Central Limit Order Book International (CLOB) scheme.The dispute has been an irritant in often-testy relations between the neighbours but a KLSE statement Monday suggested a settlement might be closer.

It said the Singapore exchange had recognised a proposal by Malaysian firm Effective Capital Sdn Bhd to handle the transfer to the Kuala Lumpur stock exchange of the frozen shares "as part of a comprehensive and expeditious solution to the CLOB issue."

The Singapore exchange, it said, indicated it would distribute Effective Capital's offer documents to shareholders next week.

The KLSE said shareholders who rejected Effective Capital's proposal "would have fully recognised" that their shares would be transferred to the Malaysian finance ministry when a deadline to settle the dispute expired on June 30.

However a spokesman for the Singapore exchange, quoted by the island's Business Times newspaper, termed the Malaysian statement "an incomplete and misleading account of the (Singapore exchange's) position."

The spokesman said a full statement would be released later Tuesday.In a separate statement the KLSE said it was not showing favouritism towards any one of a number of offers by private firms to handle the transfer.

But it said only Effective Capital had complied with all rules and procedures.

In the interests of a speedy settlement, it added, "CLOB investors should concentrate on those proposals that have fully complied with the relevant rules and procedures."

Some 100 Malaysian issues were traded under CLOB and an estimated 170,000 CLOB shareholders, mainly Singaporean, were hit by the freeze.

Singapore's Prime Minister Goh Chok Tong has said he will hold talks with his Malaysian counterpart Mahathir Mohamad this month to help break the impasse.

Deputy Prime Minister Lee Hsien Loong has said if there was no breakthrough, the matter would be resolved in court and also referred to the World Trade Organisation (WTO).

Singapore says an agreement signed in September 1998 between subsidiaries of the two exchanges on a share transfer should be the basis of a settlement.

Gerald, president of the Securities Investors Association of Singapore which represents some 50,000 of the CLOB investors, told AFP: "Reading between the lines it is very clear that the KLSE wants us to accept this (Effective Capital) offer."

He said Effective would charge shareholders a fee of two percent upfront and allow 22 months before everything was settled. "We are not interested in that sort of deal."

An alternative offer by Bintang Melewar, he said, involved a maximum one percent fee and settlement within 14 months. "Why is Effective Capital being publicised so widely by the KLSE?" he asked.

Gerald described the statement that investors should consider Effective's offer seriously or face the takeover of their shares as a threat. "Is this the way they deal with foreign investors?"

He said shareholders had grounds to take legal action or refer the dispute to the WTO.