SPLIT BETWEEN KUALA LUMPUR STOCK EXCHANGE AND STOCK EXCHANGE OF SINGAPORE (Impact and implications)

Dr Wang Kai Yuen asked the Minister for Finance (a) whether, in the spirit of Asean solidarity, the Malaysian Government informed the Singapore Government of its decision to sever the linkage between the Kuala Lumpur Stock Exchange and the Stock Exchange of Singapore prior to the Malaysian Finance Minister's announcement in the Malaysian Parliament; (b) what will be the short-term and long-term impact of the split on the Stock Exchange of Singapore; and (c) what are the implications for the investors in the Stock Exchange of Singapore.

The Minister for Finance (Dr Richard Hu Tsu Tau): Mr Speaker, Sir, the question is in three parts. I will answer them in order.

The Malaysian Minister for Finance did inform me of his Government's decision to sever the linkage between the Kuala Lumpur Stock Exchange and the Stock Exchange of Singapore (SES) prior to his announcement in the Malaysian Parliament.

At the moment, there are 182 Malaysian companies out of the 329 companies listed on the Singapore Stock Exchange. In the short term, the immediate impact of the delisting of Malaysian stocks from the SES is likely to be a decline in the turnover of the SES. Longer term, this setback should drive the Stock Exchange of Singapore to respond in two ways. Firstly, it will have to sharpen its competitive edge and upgrade the quality of services provided by stockbrokers in Singapore. Secondly, the SES will have to give greater emphasis to the trading of foreign stocks. Plans are being finalised to trade Hong Kong, Thai and Australian stocks in the over-the-counter (OTC) market through the SES electronic trading or CLOB system.

With the present technology and international interest by investors, there has been an increasing trend in the trading of stocks outside home exchanges with business going to the most competitive and efficient centres. In 1988, over S$14 billion worth of non-Singapore and non-Malaysian dollar shares were traded in Singapore, more than the S$12.8 billion turnover of the Singapore and Malaysian shares on the Stock Exchange of Singapore. In the first half of this year, the volume of non-Singapore and non-Malaysian dollar shares traded in Singapore increased to S$12 billion.

Investors in the Stock Exchange of Singapore would initially have fewer stocks to invest in. Over time, the range of stocks would be increased as more companies, both local and foreign, list on the SES. As the SES broadens its activities in the trading of foreign stocks, investors would have a wider range of stocks to invest in.

Dr Wang Kai Yuen (Bukit Timah): What is the future outlook for Sesdaq, the secondary stock market?

Dr Richard Hu Tsu Tau: Sir, I am not quite sure of the question?

Dr Wang Kai Yuen: With the split of the stock markets, what is the implication on Sesdaq?

Dr Richard Hu Tsu Tau: Sesdaq will remain as part of the Stock Exchange of Singapore. So I do not see any need to make any fundamental changes.