Malaysia has stopped the trading of its companies' shares in Singapore in a move almost certain to escalate cross-border tensions. The surprise announcement on a National Day holiday came ahead of a special cabinet meeting scheduled for today to discuss economic measures that Prime Minister Mahathir Mohamad has said would 'shock' the world. At a news conference last night, Kuala Lumpur's stock exchange chairman, Mohammed Azlan Hashim, said trade in the shares of Malaysian companies on Singapore's over-the-counter market would no longer be recognised. He said Malaysian share transactions must go through Kuala Lumpur's stock exchange or one that it recognises. Trade originating from the Singapore's Central Limit Order Book (Clob) 'is not recognised', he said. Presently, about 25 per cent of the volume in Malaysian shares is executed on the Clob. 'We understand industry participants might be concerned at the relatively short time in which these measures are implemented,' Mr Azlan said. 'We realise, however, that industry participants are faced with similar urgent circumstances - circumstances that can be addressed and eventually overcome by these measures,' he added. Meanwhile, rumours are rife in Kuala Lumpur that the new measures expected to come from today's special cabinet meeting could include curbs on the outflow of capital to safeguard Malaysia's currency as interest rates are brought down. Financial markets have been buzzing since Bank Negara governor Ahmad Mohamed Don and his deputy, Fong Weng Phak, resigned abruptly on Friday. Malaysian officials attributed the resignations to differences over interest rates, but bankers said the men opposed pending measures that could include controls on capital. Other rumours circulating in the foreign-exchange market yesterday ranged from an imminent cabinet reshuffle, to an announcement of snap general elections, to Deputy Prime Minister Anwar Ibrahim's resignation. 'I have heard it many times, but it's not true,' Bernama news agency quoted Mr Anwar as saying in his political constituency in the northern state of Penang. Speculation about Mr Anwar has mounted as Dr Mahathir and Special Functions Minister Daim Zainuddin steer economic policy on to an expansionary track and away from the austerity package that the deputy prime minister and the central bank had pursued. P.K. Basu, chief regional economist at Credit Suisse First Boston in Singapore, said foreign investors might be required to place a 30 per cent deposit at Bank Negara, the central bank, that could be withdrawn only after 12 months. That would reduce volatile short-term capital flows, he said. By bringing share trading back to Kuala Lumpur, Malaysia hopes to bolster its capital market and to improve transparency. The government had been concerned about Clob's lack of accountability and had complained that it was being used by speculators to short-sell the stocks of Malaysian companies. '[The Malaysian Government] sees it as an irritation, another means by which speculators can harm their capital market,' said Chia Yew Boon, head of Singapore and Malaysia research at Santander Investments Securities. 'They also think of it is a loss of business,' he said, 'but I don't think they have thought through the implications.' By effectively shutting down Clob, Malaysia may have ridden itself of unwanted short-term speculators, but analysts warned that it also risked the loss of genuine long-term Singapore investors. Since the start of Asia's financial crisis in July 1997, Malaysia's main stock index has fallen more than any other index in the region, about 75 per cent. The Malaysian ringgit has weakened nearly 40 per cent against the US currency in the period.