From Straits Times, Singapore
30th December 1999

Editorial : Stop the clobbering

THE nominee status of Singapore's Central Depository (CDP) for
Clob investors expires tomorrow, and there is no word yet from the
Malaysian authorities whether they will extend it. If not, Malaysian
Finance Minister Daim Zainuddin has said his country's laws allow the
Clob shares to be transferred to his ministry for their eventual
disposal. Singapore disputes this reading of the Malaysian laws. It
says the Malaysian Central Depository is obliged to transfer the
shares to the accounts of Clob investors, whether or not the CDP's
nominee status is extended after Dec 31, 1999. Clob investors, it
says, can seek legal recourse in the Malaysian courts to block Tun
Daim's move. If the Malaysians are really serious about wanting to
resolve the dispute fairly and amicably, the obvious thing to do now
is to extend the CDP's nominee status. This makes sense, particularly
when various private-sector proposals are being considered to settle
the issue. What is certain is this. Whether the Singapore CDP remains
the nominee, or whether the shares get transferred to the Malaysian
Finance Ministry, the 172,000 Clob investors are, in any case, fully
entitled to exercise their legal rights to the shares.

Contrary to what Kuala Lumpur says, Clob International, launched in
1990 as an offshore over-the-counter market in Singapore, was not and
has never been an illegal market for Malaysian securities under the
laws of the two countries. Thus, the Malaysian government, which
introduced capital controls last year to deal with the Asian financial
crisis, cannot walk away from a situation it had created and leave the
hapless Clob investors in limbo. It is now 16 months since their
shares were frozen. For the sake of Malaysia's own credibility, it
must respect contracts and honour the agreement signed between the
Singapore and Kuala Lumpur stock exchanges. Needless to say, serious
investors the world over and international rating agencies are
watching closely to see how the issue is resolved. It is not just the
Clob shares, valued at RM17 billion (S$7.48 billion), that are at
stake. Malaysia's reputation also hangs in the balance. To be sure,
the mistreatment of Clob investors will long be remembered. If the
rules are observed, Malaysia should not discriminate against, much
less deprive, legitimate investors of their shares.

Malaysia's actions clearly contravene the World Trade Organisation's
rules. The Singapore Government has said that it is prepared to bring
its case to the WTO unless a fair and comprehensive solution is found.
This, plus recourse to legal action, will be the last resort if all
else fails to convince the Malaysians to free the frozen shares. In
view of its fears about panic selling and disruptions in the Kuala
Lumpur Stock Exchange, the Securities Investors Association of
Singapore, which represents more than 50,000 Clob investors, has
proposed that the release of the shares into individual accounts be
supervised and staggered over one year.

Clob investors will have to decide for themselves what they want to do
in the face of various proposals to buy over their Malaysian shares.
It is wise for them to stick together for now, and they should neither
be rushed nor pushed into any deals. For Malaysia, more foot-dragging
will have repercussions on its image at a time when it is trying hard
to attract foreign capital back to the country. Clob investors had put
their money in Malaysian companies in good faith. They have every
right to expect to be treated as legitimate shareholders and nothing less.

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