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Malaysia shares rise on talk of end to exit tax

KUALA LUMPUR: Malaysian shares rallied in late trading on Wednesday on market talk the government might remove a tax on foreigners' repatriated portfolio capital gains.

Composite Index: up 1.90 percent or 16.06 points at 862.80, a six-month intraday high.

"I've just e-mailed all my clients about this rumour that the 10 percent exit tax will be removed," a local broker said.

Government officials could not reached for comment. In September the central bank, Bank Negara, announced a flat 10 percent tax on foreign capital gains, replacing a graduated system of taxes ranging from 10 to 30 percent.

The earlier system, strongly criticised by foreign investors, had been put in place in September 1998 as part of a package of capital control measures designed to stem the outflow of foreign capital during Asia's financial crisis.

Banking shares led the afternoon rally, as a deadline for announcing merger plans for the country's 55 banking groups approaches.

The government has told financial institutions that it wants them to submit plans for consolidation by the end of the month. Analysts have said they expect between eight and 10 organisations to appear as core groups.

Financial groups MBf Capital and Phileo Allied led the rally, along with infrastructure groups Renong and Malaysian Resources.-Reuters