[SINGAPORE] THE fate of an end-to-end link between the Singapore Exchange (SGX) and Bursa Malaysia, touted as a connection that would offer investors a "superior trading experience" - now hangs in the balance.
Just four months after its unveiling by the Najib Razak administration, Malaysia's new government led by Mahathir Mohamad has declared that the plan is on hold. Following a Cabinet meeting on Wednesday, Dr Mahathir told reporters that the project would first need to be studied.
A source close to the Malaysian government told The Business Times: "(We are) reviewing the project, just to obtain clarity and ensure that the Malaysian market will not be affected. The government basically doesn't want another Clob (Central Limit Order Book)."
The Monetary Authority of Singapore said that it has asked Securities Commission Malaysia (SC) to "clarify its position" on the planned stock market trading link and will await its update; the SGX also said it will await further clarity on the matter.
This could take a little while, as the SC said on Wednesday that it "will provide the relevant information" to assist the government in its review of the trading link.
Dr Mahathir's latest annnouncement follows recent reports that Bursa Malaysia's boss for the past seven years, Tajuddin Atan, may be replaced, as the new regime makes sweeping changes to the top posts in key institutions in the country to restore public confidence.
Mr Tajuddin was part of a six-member royal commission set up last year by the then Najib-led government to probe the foreign exchange losses suffered by the central bank in the 1990s, during Dr Mahathir's first watch as prime minister.
It was a move widely construed as aimed at vilifying the now-92-year-old who is having his second go at being premier; it was also read as an effort to skew the spotlight away from the massive scandal involving 1Malaysia Development Berhad (1MDB) ahead of this year's May 9 polls.
Malaysians voted for change and ousted the long-ruling Barisan Nasional. The new government led by Pakatan Harapan has since unearthed more details on the money trail of the state-owned firm, and appointed a new Attorney-General Tommy Thomas, who has vowed that none of the alleged wrongdoers involved in the 1MDB scandal will be spared.
When the SGX-Bursa link was announced back in February, the project's proponents had stressed that the trading link would unlikely turn into a "Clob 2.0", as Clob was an over-the-counter market that was not endorsed by the Malaysian government; the proposed link, on the other hand, would bring regulators from both sides together.
The Clob debacle in Singapore took place 20 years ago, when Dr Mahathir outlawed trading of Malaysian shares offshore to stem the bruising outflow of hot money during the Asian financial crisis. In doing so, he froze billions of dollars of investments belonging to more than 150,000 Singaporean investors - a move still not forgotten by investors today.
It had been hoped that the link-up would provide investors on both sides of the Causeway access to a total of 1,600 public-listed firms worth more than US$1.2 trillion (S$1.6 trillion), and add sizzle in the form of better liquidity for both exchanges.
It was also hoped that it would bring to closure the Clob saga and catalyse tie-ups with other Asian stock markets.
Securities Investors' Association of Singapore president David Gerald said: "Investors from both sides of the Causeway stand to benefit by the arrangement and it is therefore difficult to understand on an economic basis why the arrangement should be scrapped. Nevertheless, if it is for financial reasons Malaysia wishes to review it, then we will wait and see what comes out of their decision."
Malaysia's latest move to review the joint project follows last week's decision to shelve the landmark multi-billion dollar High-Speed Rail (HSR) project between Malaysia and Singapore; Malaysia's new government had said it is making efforts to restore the finances of a country now saddled with more than RM1 trillion of debts.
Some observers are wondering whether the recent decisions on projects emblematic of the warming ties between both countries could signal that the ties are being challenged.
Manu Bhaskaran, chief executive and founding director of Centennial Asia Advisors, is more optimistic. He said: "Do note that Malaysia has withdrawn the Pedra Branca case, which is good for bilateral ties. So, it is not all bad and there is no need to over-react."
A highly-placed source said the new administration appears to be scrutinising projects undertaken during Mr Najib's premiership - embroiled as he allegedly is in the 1MDB scandal - to ascertain whether the country's interests in these projects could have been compromised.
Since the forming of the new government, Malaysia's anti-graft agency has queried both Mr Najib and his wife on 1MDB monies, and residences linked to him have been raided.
Mr Najib has denied wrongdoing.
Robson Lee, a Singapore-based lawyer at Gibson, Dunn & Crutcher LLP, said: "I believe, as a result of the recent discovery of dubious transactions and projects inked by the previous government, the present Malaysian government is reviewing all projects agreed to by the previous government to ensure the integrity and financial soundness of each project."
But he added: "I hope the new Malaysian government will give serious consideration to the intangible longer-term benefits for the Malaysian market co-existing within a more integrated regional market."