SO Morgan Stanley Capital International (MSCI) has deemed it is appropriate to put Malaysia back in its hugely influential indices of free markets. Try talking to the 170,000 account holders of the Central Limit Order Book (Clob) exchange about Malaysia's free markets. The Singapore-based Clob market was set up to allow Malaysian companies to raise money through the deeper markets of the city state. Then the idea of international markets sat well with Dr Mahathir Mohamad and his ruling coalition, playing a key part in funding his dream of Malaysia as a modern, industrialised country. However, when the Asian crisis broke out, Dr Mahathir quickly forgot the benefits Malaysia had enjoyed from exposure to international markets, picked up his ball and went home. Some of the biggest losers of this volte face are the Clob investors, mostly Singaporeans, who hold about S$2 billion (about HK$9.25 billion) worth of Malaysian shares which they cannot trade under the capital controls imposed by Kuala Lumpur last September. Since then their anger has turned to frustration as Malaysia has refused to lift the ban. Instead private Malaysian investors stepped forward to offer to buy the shares at steep discounts, rubbing salt in the Clob-holders' wounds. 'The Clob issue is purely a political one now. There's nothing financial about it,' one fund manger told Sunday Money this week. He was at pains not to be quoted by name, pointing out the difficulties of operating in a country where you can be a deputy premier one day and be beaten in jail and hit with charges of sodomy and abuse of office the next. Free markets are not just about being able to buy and sell freely. They are also about being able to exchange information freely so intelligent decisions can be made about what and when to buy and sell. Whether it likes it or not, MSCI has to recognise that its decision to reinstate Malaysia has political as well as financial implications. MSCI would, of course, have known that its announcement this week would have sent Malaysian stocks soaring and provided a boost for Dr Mahathir and his coalition as it prepares for an election and probably yet another term in office. MSCI may argue that Malaysia's inclusion in the indices will not happen until February and that it will make the resolution of the Clob impasse a condition of going ahead. But having made its announcement, MSCI is to a large degree committed. It would be difficult for it to maintain credibility if it were to turn around to the investment community and say it had changed its mind, particularly as fund managers would already have begun buying stocks in Malaysia to bring their weightings back into line with the index. The reasons for a hasty reinstatement are not compelling. The investment community is fond of insisting on the removal of management which has taken a company down the wrong path. At the least, MSCI should have waited until all capital controls were removed and the Clob issue resolved. It could even be argued that it should have waited until a regime more committed to the principles of free markets in fair weather and foul took office in Kuala Lumpur.