Malaysians who are new to investing might be interested in how to purchase shares in Malaysia or open a Malaysian brokerage. You could also be a foreigner looking to invest through a Malaysian brokerage.
It doesn’t matter what situation you find yourself in, it is important to choose a brokerage that best suits your needs. Here are six things I consider as a Malaysian value investor.
1. CDS vs. nominee account
Let me tell you what the difference is between a CDS and a nominee account.
You must first open a Central Depository System account before you can open a Malaysian brokerage account. You can trade shares with your broker through a brokerage account. The ownership of Malaysian securities is recorded in a CDS account. Bursa Malaysia stocks).
You could have a brokerage account at both Maybank or CIMB. Stock A is bought through Maybank, while Stock B is purchased through CIMB. You are the direct owner of both stocks even though you purchase them through different brokerages. You enjoy voting rights and the right of attending AGMs/EGMs as the direct owner.
Malaysian brokerages can use trust (nominee accounts) accounts to purchase shares on your behalf. As a Malaysian, for example, I can purchase shares of the Singapore Exchange (SGX), through my Malaysian brokerage, who will then place those shares into a nominee account that I have been assigned. Since I do not have a CDP account (equivalent in Malaysia to the CDS account), I am and not the owner of the shares in Singapore. This means that I can’t vote for my Singapore stocks or attend EGMs/AGMs. However, I will still be able to receive dividends and subscribe to rights issues.
A CDS account can be opened by foreigners provided you have a Malaysian bank account. It can sometimes be difficult for foreigners opening a bank account. A nominee account may be more convenient in this situation. Nominee account holders may be charged additional fees by brokerage firms for handling dividends, etc. It is best that you sort them out before opening one.
2. Market Access
This is crucial to me because I have both Bursa Malaysia (local), and SGX(foreign) shares. This is why I need a brokerage that can execute both foreign and local transactions. Stocks listed in Australia, Canada, Thailand, Hong Kong and Australia may be of interest to me. If you’re only interested in local Malaysian stocks, a brokerage that serves the local market may be sufficient.
These brokers located in Singapore offer better rates if you’re interested in trading foreign shares. If you are not a Singaporean citizen, or resident, a nominee account will be opened. You should also be aware of any fees incurred by intermediary or corresponding banks when you transfer money to your nominee bank. These fees can sometimes be quite high. Based on my experience, S$20 to S$60 will be deducted for each transfer of money via telegraphic transfer to FSMOne or Saxo Markets nominee accounts, respectively.
3. Types of investment products
All brokerage firms in Malaysia offer similar services. You can trade preference shares, ordinary shares, warrants and exchange traded bonds (ETFs), sukuk ( ETS), business trusts and real estate investment trusts. Here’s a list displaying the top Malaysian REITs who made money from their IPOs.
Bursa Malaysia Derivatives currently owns Bursa Malaysia. This includes commodity, equity and financial derivatives trading, including options and futures.
4. Role for a stockbroker
Personally, I am a value investor. This means that I buy and accumulate good stocks at low prices over the long-term. This is why it is important to choose a stockbroker. It is because it is important that you establish your investment goals before you settle on a stockbroker.
A stockbroker’s role is to assist me in executing my trades. It is not that a stockbroker provides stock tips or recommendations for buying/holding/selling any stock. It is important to understand that your stockbroker’s interests may differ from yours. You want a stockbroker who is committed to your investment goals. He should be able to understand that you are a long-term investor and not call you with tips that do not benefit your investment goals.
5. Online/offline access
Online access is my preference over offline. It’s convenient, easy, and much cheaper. Trading platforms have been designed so that you can trade stocks even if your IT skills aren’t great. You will be more likely to make mistakes.
If you have any questions about the trading platform of your brokerage, you can always WhatsApp or call your stockbroker. Finding a knowledgeable stockbroker or trade representative is the key. It is also convenient to have a local brokerage office so I can make a trip down when necessary.
6. Brokerage charges
Below is a list listing Malaysian brokerage companies and the minimum transaction fees they charge for trading Bursa Malaysia shares. This fee is based on cash trading (nonmargin). These cash accounts have a trading limit that is dependent on how much cash you have in your brokerage account. These accounts usually charge less brokerage fees than margin accounts. Margin financing can be a dangerous tool, as it increases both earnings and losses.