Updated post can be found at: http://dividendmagic.com.my/stock-investment-malaysia/
I’ve come across numerous Malaysian individuals who are clueless on how to start investing in our share market -Bursa Malaysia. This post will serve to address all the daunting queries and quandaries faced by the Malaysian public.
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 trading 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.
Creating your 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.
Your next question will naturally be: “Which broker should I patronize and open my CDS account with?” The answer to which can be found on Investor.com. The site gives you the breakdown of all the brokers available in Malaysia and rates them based on a star system. Personally, I’ve gone with Hong Leong Bank and will be using their system as an example throughout my posts.
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.
How much should I start with?
With Hong Leong bank as an example, they charge a Flat brokerage rate of 0.1% subjected to a 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 RM1K rounded up to the nearest ringgit subject to maximum value of RM200.
The clearing fee is charged by the exchange’s clearing house – Bursa Malaysia. The fee is 0.03% of the contract value or value of shares subjected to 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
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. Investors who attend a company’s AGM will usually be surprised to find some companies like Nestle provide some pretty awesome door gifts. An example would be this year’s door gift back in April (read about it 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 investing.
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 with the prospect of investing.
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.