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Stock Investment in Malaysia
I’ve come across numerous Malaysian individuals who are clueless on how to start stock investment in Malaysia. This post will serve to address all the daunting queries and quandaries faced by the Malaysian public regarding stock investment in Malaysia.
Bursa Malaysia operates a fully integrated exchange, offering the complete range of exchange-related services including trading, clearing, settlement and depository services. Familiarize yourself with the trading hours of the local market as listed below.
Monday – Friday (except public holidays)
- Pre-Open – 8.30 am – 9.00 am
- Continuous Trading – 9.00 am – 12.30 pm
- Pre-Open – 2.00 pm – 2.30 pm
- Continuous Trading – 2.30 pm – 4.45 pm
- Pre-Close – 4.45 pm – 4.50 pm
- Trading at Last 4.50 pm – 5.00 pm
- Close – 5.00 pm
Also note that when investing in stocks in Malaysia, a minimum of 1 lot is required, and 1 lot is equivalent to 100 shares. So, for example, let’s say you decide to purchase 1 lot of Nestle Malaysia, and the share price is RM70. You will require to fork out a cool RM7,000 for this minimum transaction. This is the reason why some would call Nestle an ‘expensive stock’. However this, to me is a misleading comment as the only thing that is ‘expensive’ about Nestle in this situation is its minimum investment.
Edit: As of September 2019, Nestle Bhd’s share price has more than doubled to RM145 per share.
Creating your Stock Investment Account a.k.a. CDS Account
Firstly, CDS stands for “Central Depository System”, and all CDS accounts are maintained by our very own Bursa Malaysia Bhd. As an individual, one will have the option to create either a Direct CDS Account or a Nominee CDS Account. To cut to the chase, I would advise opening a Direct CDS Account for the Malaysian individual as the only advantage of a Nominee CDS Account is you as a shareholder will not need to worry about the paperwork related to any corporate exercises.
The only exception I would make is for Rakuten Trade’s nominee account. They provide services with no extra fees. Ie. Corporate Actions.
Your next question will naturally be: “Which broker should I patronize and open my CDS account with?” The answer to which can be found hERE. I’ve broken down all the suitable brokers available in Malaysia with simple details in the table. Personally, I use Hong Leong and Rakuten Trade. I will be using their system as an example throughout my posts.
Rakuten offers the most convenient way for Malaysians to open a CDS and a brokerage account. It can all be done online. Account registration and opening can be done hERE.
To open my Hong Leong trading account, I had to pay a visit to their office at First Avenue in Petaling Jaya. I’d suggest giving them a call (03-7728 8222) beforehand to determine the documents they need to proceed to avoid having to make multiple unnecessary trips. What I had to bring with me during my trip was my NRIC and verified copies of my savings account.
Cash or Margin Account?
Always a cash account. Unless you’re really experienced and confident in your trading abilities, please DO NOT even consider a margin account. A margin account, also known as a collateralized account allows you to borrow money to buy shares. Your broker charges you interest or higher fees for the right to borrow that money and uses your security as collateral.
Using leverage to buy your shares is very very dangerous because of a clause and event known as a Margin Call.
A margin call is a broker’s demand on an investor to deposit additional money or securities so that the margin account is brought up to the minimum maintenance margin (based on their own particular formula).
Basically, if your portfolio value falls below a certain amount, your broker will require you to top up until you reach that threshold. If you don’t they’re going to start selling your shares, at a loss. And it is extremely easy for your portfolio to fall below that threshold because the stock market is so volatile in the short term.
In short, go for the cash upfront account.
How much should I start with?
With Hong Leong bank as an example, they charge a flat brokerage rate of 0.1% subjected to an RM8 minimum brokerage. With these charges, since you will be charged a minimum of RM8 anyway, the minimum amount you should technically trade at would be RM8/0.1% = RM8,000. This is not including your stamp duty, clearing fees as well as GST.
The stamp duty is charged by the Malaysian government. You will have to pay RM1 for every RM1,000 rounded up to the nearest ringgit subject to a maximum value of RM200.
The clearing fee is charged by the exchange’s clearinghouse – Bursa Malaysia. The fee is 0.03% of the contract value or value of shares subject to a maximum of RM1,000.
In my experience, these fees will set you back by about 0.25% per trade. More if you trade below the minimum threshold of RM8K.
With that in mind, ideally I would recommend you start with RM8K, but of course, I realize that not everyone starting out is comfortable spending such an amount, which is why the lowest amount one should use to execute a trade would be in my humble opinion RM3K.
Picking your stocks
A simple method for stock investment in Malaysia and an early method I used in picking my stocks was to look at products I owned or purchase on a regular basis. For example, while strolling through the grocery aisles, you’d notice 80% of the products on display are owned by a few major companies. One of them being Nestle. With that, I invested in Nestle early on and have held the stock since then. They provide steady dividends and Malaysians love their Milo, Kit Kat, and Maggi.
Attending a company’s AGM such as Nestle’s will usually provide you with some pretty awesome door gifts. A comprehensive list of door gifts from AGMs can be found hERE. This method is as simple as they come and will only work if the stock is held for the long term and it is a steady and huge rock-like Nestle.
There are tons of other valuation methods out there and I urge you to study them extensively and decide on a few that suits your risk appetite and attitude towards stock investment.
Photo source: philstar.com
My investment philosophy has always been for the long term. And it is my belief that short term investments will always hurt you in the end.
Please let me know if I’ve failed to address any of your concerns. I hope I’ve at least helped Malaysians feel less daunted by the prospect of investing. As mentioned earlier, the next place to start would be your choice of a brokerage firm. You’d want to make a good decision here to avoid inconveniences in your investing journey. Start with my comparison of brokers in Malaysia.
It has been an incredible and amazing journey for me and I hope, for you as well. I will continue updating this post if and when I come across additional relevant information.
Do you currently have any stock investment in Malaysia?