In all the commentary so far on the announcement that Malaysia will ease its capital controls there is one gem that cries out for attention. Salomon Smith Barney, the American investment bank appointed as an adviser to the Malaysian Government, has praised the five-month-old restrictions, saying that they helped stabilise the markets and had freed up interest-rate constraints. This prompts an immediate word of advice to our own Financial Secretary Donald Tsang Yam-kuen as the Hong Kong Government deliberates which big foreign investment banks it should appoint as advisers on the disposal of the portfolio it acquired when it intervened in the stock market last August. Appoint them all, Mr Tsang. The immediate result will be resounding praise for your foresight and wisdom in making a superbly timed intervention that forestalled foreign pirates from manipulating the market and delivered them a stinging lesson to respect Hong Kong's financial system. Salomon Smith Barney is not unique. They all operate much the same way. There is a big 'For Sale' sign posted on their opinions. It's probably worth the fees they want. Malaysia has given itself some new headaches with its partial lifting of restrictions. It does not want all the foreign investors which it trapped in its market on September 1 last year to leave immediately. It has therefore imposed a graduated exit tax. Sell now and you pay a tax of 30 per cent on the sum you initially put in. From April 1 that drops to 20 per cent, from June 1 to 10 per cent, and from September 1 the exit tax vanishes but you pay a 10 per cent profit tax. The immediate difficulty is that the Malaysian stock market has rocketed since the ban was imposed. The KLSE Composite Index has risen by 120 per cent over the period and has also outperformed the stock markets of the rest of Asia ex-Japan by a weighted average of 68 per cent in US dollar terms. Meanwhile, many foreign investors trapped in September were immediately compelled by the rules governing them to write down the value of their portfolios to the prices they could get at the time of the ban or to even lower levels. This means that most of them could now turn a profit by selling their holdings, even after paying a 30 per cent exit tax. Will they want to? The question now facing them is whether they should hold on a little longer, perhaps to September, and increase their profits by paying no exit tax at all. They may even decide to stay in the market in the hopes that it will rise further. But one thing would certainly deter them from doing so. They will all be sellers if the Malaysian Government does not continue to liberalise its treatment of them to the point of restoring the state of affairs that existed before and then making some real commitment not to jump on them again. If this is not immediately apparent their thinking will follow another tack. Why wait until September, they will ask themselves, when there cannot be much prospect for a still highly restricted market which has already risen enormously and when everyone else is likely to sell once the exit tax disappears? You may save 30 per cent on the exit tax but in such circumstances the Malaysian market could easily plummet again before then and wipe it all out. It is a highly volatile market after all. Having unwound some of its restrictions, the Malaysian Government has no option but to unwind the rest and quickly too. It's all or nothing now. There is no happy middle ground left.