Singapore has suspended trading of Malaysian stocks on its Central Limit Order Book (Clob) over-the-counter market, an indication international confidence in Malaysia's political and economic reforms had hit a new low. The Stock Exchange of Singapore said: 'Trading in Clob Malaysian shares will be temporarily suspended pending an announcement.' It gave no other details. While share prices in Kuala Lumpur have rocketed, those on the Clob market have plunged all week after Malaysia announced on Monday it would no longer recognise Malaysian shares traded abroad. Investors have since been clamouring to find out whether Malaysian shares they bought or hold in Singapore can be transferred to the Malaysian Central Deposit (MCD) in Kuala Lumpur, or whether they will be declared void. Chia Yew Boon, research head at Santander Investments Securities, said: 'Investors panicked because they thought their shares were going to be worthless.' Some Malaysian shares were trading in Singapore at an 80 per cent discount to their equivalent Kuala Lumpur listed price before the suspension. This has exacerbated the already difficult situation. If Malaysia does allow Clob shares to be transferred, it then has to decide at what price. A dealer with a banking group said there was talk the Malaysian and Singapore stock exchanges were trying to negotiate a fair settlement price for shares traded on Clob. An MCD circular to banks said Malaysian shares transferred to its depository by Monday would be accepted without supporting documents. However, dealers in Singapore are unsure whether this means shares transferred after that date would not be accepted. Also, Singapore banks do not know what to do with Malaysian stocks pledged on loans as collateral given Malaysia's new capital controls. Lee Gek Lang, head of research at Indosuez WI Carr, said: 'This has got financial institutions all muddled up.' Adding to concerns are persistent rumours that Clob will be shut down completely, something the Singapore exchange has denied all week. The UOB-OTC Index, which tracks shares on the Clob, plunged 15 per cent on Thursday amid speculation that the exchange will be shut down within a month. Malaysian stocks traded in Kuala Lumpur surged another 16.08 per cent yesterday as state-linked institutional funds entered the market. Lai Tak Heong, research head at SG Securities, said: 'The market probably would have been going up irrespective of intervention. 'As they bring down interest rates, local people are buying stocks. At the same time, the foreigners aren't selling because their money is locked in the country.' Little fresh foreign money is expected to enter the Malaysian market while restrictions on repatriating the money remains. Malaysia will be removed from the Morgan Stanley Capital International's Developed Markets series of indices from October 1, it was announced yesterday. Daim Zainuddin, Malaysia's special functions minister who helped draw up this week's new capital controls, last night claimed they were aimed at averting political instability and economic chaos. 'When there is instability there is going to be economic chaos and I don't think foreigners will be interested in investing [in Malaysia],' Mr Daim said.