Singapore and Malaysian share investors can look forward to trading in each other's stock exchange by the year end.
This seamless access to a total of 1,600 public-listed firms worth more than US$1.2 trillion (S$1.6 trillion) is made possible by a stock market trading link to be set up between Bursa Malaysia (BM) and the Singapore Exchange (SGX).
The initiative will be expanded later to include other stock markets in the region, a move that can only create greater vibrancy to Asean stock markets, experts said.
Yesterday, the Monetary Authority of Singapore (MAS) and Securities Commission Malaysia said in a joint statement that they would work together to set up a stock market trading link to make it more convenient and cost-efficient for investors.
The statement came shortly after Malaysian Prime Minister Najib Razak announced the move at the World Capital Markets Symposium in Kuala Lumpur.
The new trading link will extend beyond trading to cover post-trade arrangements like the clearing and settlement of stocks traded.
Regulators MAS and Securities Commission Malaysia will set up cross-border supervisory and enforcement arrangements, and work with the two exchanges to operationalise the link.
MAS assistant managing director (capital markets) Lee Boon Ngiap said: "The trading link will help lower trading costs for investors and encourage greater cross-border investments... This will improve the liquidity of both our stock markets."
Tan Sri Ranjit Ajit Singh, chairman of Securities Commission Malaysia and also of the Asean Capital Markets Forum, said the setting up of the link "is an important step towards encouraging Asean investors to invest in Asean".
The news was widely welcomed by market players.
Investment Management Association of Singapore chairman Nicholas Hadow "totally supports" the move as it will lower cross-border costs and benefit both retail and institutional investors.
Currently, investors in Singapore have to trade through a broker who has an account with a Malaysian broker, which adds to costs.
The details of the new trading link are still being worked out.
Addressing concerns that it could be another Clob, a Securities Commission Malaysia spokesman said the new link will be jointly led by the two countries' regulators, working with BM and SGX.
In 1998, 172,000 mostly Singaporean investors who had bought Malaysian stocks via the Clob (Central Limit Order Book) system in Singapore found the shares frozen indefinitely after Kuala Lumpur banned the trading of Malaysian stocks outside the country.
The spokesman stressed that the trading link would connect both exchanges where orders would be routed to each other, with a corresponding post-trade arrangement between the two clearing houses to facilitate seamless settlement in local currency for investors.
With the two governments working together, the new trading link is a positive first step towards a greater Asean-wide stock connect.
Said Mr Alvin Goh, Citi's managing director and head of securities services, Asean: "The initiative will not only open new investment opportunities for investors, but will also set a new template for other exchanges in the Asean region to connect. This is another step towards the integration of the capital markets in the region."
