The link between Bursa Malaysia and the Singapore Exchange would allow investors to trade and settle shares listed on each other’s stock market in a more convenient and cost efficient manner, benefitting retail investors, both regulators said in a joint statement.
Prime Minister Najib Razak announced the move first to investors gathered at the World Capital Markets Symposium in Kuala Lumpur today.
“A regulatory arrangement will be worked on by the countries’ relevant regulatory authorities, to pave the way for the establishment of this trading link,” Najib said in his speech.
He said the “Malaysia-Singapore Connect” would provide investors in both countries easier and seamless access to each other’s markets with a combined market capitalisation of more than US$1.2 trillion and 1,600 public listed companies.
The bilateral link between the bourses will cover post-trade arrangements such as clearing and settlement of the stocks traded.
The Monetary Authority of Singapore (MAS) and the Securities Commission Malaysia (SC) will set up cross-border supervisory and enforcement arrangements.
“The trading link will help lower trading costs for investors and encourage greater cross-border investments in the stocks listed on each other’s exchanges,” said Lee Boon Ngiap, assistant managing director at MAS.
“This will improve the liquidity of both our stock markets,” he added.
Countries in Southeast Asia have been trying to improve their financial connectivity by linking their capital markets for years, but progress has been slow.
Jingyi Pan, a Singapore-based market strategist at trading and investments provider IG, said the move was expected to facilitate more cross-border flows between the two countries and could be the first step to seeing more such links in the Asean region.
Singapore was part of Malaysia after the end of British colonial rule but they separated acrimoniously in 1965, clouding diplomatic and economic dealings for decades.
Ties between the countries, however, have improved under the leadership of Najib and Singapore Prime Minister Lee Hsien Loong.
Malaysia and Singapore are finalising a project to build an estimated US$17 billion high-speed rail linking both countries.