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SCMP Reporter

Three months ago, old foes India and Pakistan tried patching up some of their long-standing differences through 'bus diplomacy'.

 Indian Prime Minister Atal Behari Vajpayee and his Pakistani counterpart, Nawaz Sharif, boarded a New Delhi-Lahore bus service and used the time to talk things through.

 Perhaps Malaysian Prime Minister Mahathir Mohamad and Singapore Prime Minister Goh Chok Tong should try taking a public bus ride together across the Singapore-Johore causeway to resolve a nagging problem - the Clob shares issue.

 More than 10 months have passed since Kuala Lumpur suddenly banned trading of Malaysian shares abroad, freezing M$14.5 billion (about HK$29.6 billion) worth of shares bought over the counter through Singapore's Central Limit Order Book (Clob International).

 Clob's 172,000 account holders, mostly Singaporean, have been unable to touch their funds since and neither leader seems keen to take a lead in resolving what has evolved into another sensitive bilateral political issue.

 Mr Goh has remained publicly silent on the matter, while Dr Mahathir has shrugged it off by claiming it is a 'private-sector issue' and all Singapore's fault.

 Malaysian Foreign Minister Syed Hamid Albar arrived in Singapore yesterday on his inaugural official visit and reiterated that Clob was not on the agenda.

 'Clob was created unilaterally by Singapore and therefore Malaysia must not be blamed for problems faced by Clob now,' said Mr Syed Hamid.

 Dr Mahathir maintains that Clob and the shares acquired on it are illegal.

 That was not a claim he made in the boom years before Asian financial crisis, when piles of offshore money flooded into listed Malaysian firms through Clob.

 Fears of Clob being used as a loophole to unpopular capital controls last year no doubt prompted a change of tune.

 An unrelenting political desire to prevent a mass exodus of funds still holds sway, with a Malaysian general election around the corner. The last thing Dr Mahathir wants now is for the recent Malaysian stocks bubble to burst.

 Before partition, Singapore and Malaysia shared a joint Malayan stock exchange.

 When Singapore left the federation in 1965, Clob was set up to provide a convenient means for wealthy Singaporeans to continue investing in Kuala Lumpur-listed stocks and prevent an exodus. Malaysia had no objections at the time.

 These days, Singapore-based investors are not protesting Malaysia's sovereign right to no longer recognise overseas trading of its shares.

 What they do object to is being unable to touch their money - something one international magazine recently referred to as 'daylight clobbery'.

 Dr Mahathir wants a private-sector solution, but nothing acceptable has yet emerged.

 Three Malaysian private-sector offers have been made to buy the disputed shares in bulk at a discount, in return for holding on to the shares for a minimum number of years to allay Dr Mahathir's dumping fears.

 But the proposed discounts have proved too much for Clob investors to bear.

 Businessman Akhbar Khan's Effective Capital offer had a take-up rate of less than 0.01 per cent.

 The Securities Investors Association of Singapore, a Clob investors' lobby group, has unsuccessfully called for moving the shares to the Kuala Lumpur Stock Exchange.

 The Stock Exchange of Singapore is suggesting Malaysia allow shares to be unlocked in phased batches. But the early signs suggest this too may be shot down in Kuala Lumpur.

 Until Dr Mahathir recognises foreign investors' property rights and resolves the Clob saga, Morgan Stanley Capital International is unlikely to re-admit Malaysian stocks into its benchmark indices for fund managers.

 Given that Morgan Stanley is next due to review Malaysia's exclusion at the end of next month, the time is ripe to put Mr Goh and Dr Mahathir on a bus and bang some heads together.

Jake van der Kamp is on holiday.



Bus trip just the ticket for Clob deadlock