The Malaysian Prime Minister, Mr Mahathir Mohamad, has announced a massive government share buy back scheme in a fresh bid to rescue the country's sinking financial markets. In what analysts said was an unprecedented move, Mr Mahathir said the Malaysian government had allotted $20.27 billion to buy back shares of listed companies from its citizens at a premium to the market.
"Our plan is now to defend our stocks. We have decided that we will buy at a premium all shares sold by our local people," Mr Mahathir said. His announcement came after trading in Kuala Lumpur had closed for the day with stocks slumping to four-year lows, despite the strong recoveries in other Far East stock market.
The benchmark Kuala Lumpur Stock Exchange Composite Index of 100 leading stocks lost ground for the ninth straight session, ending down 5.65 per cent or 44.97 points at 750.76, its lowest level since July 1993. Volume stood at 361 million shares, valued at 1.46 billion ringgit. Losers swamped gainers 661 to 87. The ringgit slid to a new all-time low yesterday, sinking to 2.9860 to the dollar.
Analysts said they were bewildered by Mr Mahathir's announcement. Most were unsure what impact the rescue plan would have on stock prices when the market reopened, or even if it would be viable.
"I don't know how they are going to work it. How can you tell who is selling? Administratively it is difficult to do," said a research manager at a foreign brokerage. "If this is true, you are stuffing the foreign clients again," said an analyst at a foreign brokerage firm, who added that the rule may be easily circumvented.
Malaysian shares have lost about 40 per cent of their value since the end of March and the ringgit currency has lost almost 20 per cent of its value against the US dollar since early July.
A plan to halt the stock market's drop by banning short selling in the key blue chips backfired and aroused the ire of foreign investors whose positions were trapped by shorter trading settlements. Some have since withdrawn from Malaysia's markets altogether.
