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Date: 13 Aug 1999
Time: 04:54:52
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KLSE re-listed
Morgan Stanley to restore Malaysian bourse in its investment indices
By Jagdev Singh Sidhu
KUALA LUMPUR: The influential American financial services company Morgan Stanley said it would reinstate Malaysia on its stock market indices--a move that will attract billions of ringgit in foreign funds into the Kuala Lumpur Stock Exchange (KLSE).
News of the impending decision led to frantic buying on the KLSE yesterday, pushing the composite index up 40 points to 728, representing a gain of almost 6%.
Analysts said that the market was extremely delighted about the news, and they expect another strong performance by the KLSE today.
In a statement yesterday, Morgan Stanley Capital International (MSCI) said the MSCI Malaysia Free index will be re-included in the MSCI Emerging Markets Free index and the MSCI All Country (AC) Free Index series, including the MSCI AC Far East ex-Japan Index.
Malaysia would, however, no longer be included in the developed market series.
MSCI said the reinstatement would be from February next year, to coincide with MSCI's quarterly structural changes "barring a reversal in the process of liberalisation of its (Malaysia's) financial markets."
It said it would make a further announcement on Malaysia's re-inclusion before Oct 31.
The KSLE was struck out from the MSCI's indices shortly after the Government imposed capital controls on Sept 1 last year and prevented a repatriation of foreign capital for a one-year period.
That moratorium has been replaced with an exit tax which allows fund managers to withdraw their money from the country after paying a levy.
"Although this and other factors leave the investment framework in Malaysia less favourable than it was prior to Sept 1, 1998, it is nevertheless comparable to that of certain other markets included in the MSCI Emerging Markets Free Index series," MSCI said.
It said that in line with the lifting of the restriction to repatriate capital, the 15% discount that MSCI applies to the pricing of all Malaysian securities via the foreign exchange rate would also be discontinued.
MSCI's decision to re-include Malaysia in its indices is a boost to the KLSE as many big foreign funds, by their charters, are not allowed to invest large sums of money in non-MSCI indices.
In a telephone interview with The Star, MSCI spokesman Johnathan Fildes said the annoucement was being made before Sept 1 so that foreign investors in Malaysia could choose not to repatriate their funds in view of the KLSE's re-inclusion on February 2000.
He said the KLSE's re-inclusion would also depend on how the now-defunct Central Limit Order Book International (CLOB) issue was handled.
"It is an indication of shareholders' rights. We do take that into account," he said.
With the KLSE's reinstatement in the MSCI indices, Malaysia would have a weightage of 7.2% on the All-Country Free Ex-Japan index and 5% on the Emerging Markets Free index.