FTSE Mondo Visione Exchanges Index:
KLSE Statement Misrepresents Singapore Exchange (SGX) Position
Date 01/02/2000
The Kuala Lumpur Stock Exchange ("KLSE") issued a statement on 31 January 2000 with regard to the meeting with SGX yesterday. The statement was titled "SGX recognises Effective Capital's proposal". This is an incomplete and misleading account of SGX's position.
Mr Lim Choo Peng, President SGX, met Encik Mohd Nor Ahmad, Deputy President KLSE, on 31 January 2000 in Kuala Lumpur. The discussion was without prejudice to the legal rights of either side. Both sides had note-takers, and Mr Lim Choo Peng spoke from prepared notes.
Mr Lim said that SGX accepted KLSE's policy that any solution must not disrupt the Malaysian market, and it was with this in mind that SGX had made a without prejudice proposal to KLSE in July last year. From KLSE's statement of 28 January 2000, SGX learnt that Effective Capital's was the only offer KLSE had approved. Mr Lim said that SGX had no objections to including Effective Capital's proposal as part of the comprehensive solution, if that was KLSE's view.
Mr Lim pointed out problems with Effective Capital's proposal as it stood. Firstly, there was no assurance that MCD would indeed effect the transfers of accepting Clob investors in accordance with the proposal. Secondly, the terms were not satisfactory.
Mr Lim said that for SGX, a comprehensive solution involved the migration of all Clob securities to the investors' accounts. If that was not done, SGX would have no choice but to resort to the courts and WTO to require KLSE to perform its legal obligations.
Mr Lim asked KLSE to respond to SGX by Tuesday, 8 February 2000, on the above issues affecting the offer, i.e. addressing the shortcomings of the offer and the need for a comprehensive solution.
Mr Lim said that SGX had not deliberately delayed distributing the offer documents. But SGX was considering whether to disseminate the documents for all the private sector offers together, to enable Clob investors to decide and compare the various offers on their merits. Only on 28 January 2000 did
KLSE state that Effective Capital's proposal was the only one that complied with its rules and procedures. In view of this, SGX would send out Effective Capital's offer next week.
In view of KLSE's apparent misunderstanding of SGX's position, SGX has written to KLSE to reiterate what it stated at the meeting yesterday.
It is not for SGX to endorse Effective Capital's offer, or any other private sector offer, as a way to solve the CLOB problem. Private sector offerors need the co-operation of KLSE, not SGX, to implement their proposals. SGX is prepared to include any offer from any private party that is reasonable, and that is endorsed by the KLSE, as part of a comprehensive solution for all CLOB investors.
SGX concluded that KLSE had endorsed Effective Capital's offer, because KLSE's 28 January 2000 statement had stated that as at 31 December 1999, Effective Capital's was the only complete proposal which has fully complied with the rules and procedures.
The discussions between SGX and KLSE on 31 January 2000 were on a without prejudice basis, i.e. SGX reserves all its rights under the law and the CDP/SCANS agreement, if the discussions are not fruitful.
SCANS' contractual obligations under the CDP/SCANS agreement are binding in law. These obligations, as well as those arising from Malaysian statute and WTO commitments, are for all securities to be migrated into individual investors' securities accounts for trading on the KLSE. Hence SGX's insistence on reasonable arrangements for a comprehensive solution.
KLSE stated its view that CLOB investors who do not wish to accept Effective Capital's proposal would have fully recognised that their securities would be transferred to the Minister of Finance after 30 June 2000. Our advice is that this view is incorrect. QC has advised that there is no basis in law for such a transfer to the Malaysian Minister of Finance. Indeed, MCD has a statutory duty to transfer the CLOB securities into the beneficial owners' individual securities accounts under Malaysian laws.
SGX hopes that the two sides can resolve the CLOB issue without having to pursue the matter at WTO and the courts. An expeditious and comprehensive solution is in the interest of both Malaysia and Singapore.