Guide for Beginners: Investing in Malaysia's Stock Market
Stock trading can be both simple and intricate, attractive and dangerous. Before you take any action, understanding how it works and what you can do should be the first step.
In this article, we will discuss the following questions, offering you a clearer view of stock trading:
What is stock?
Why should you try stock investing in Malaysia?
What are the top five largest-cap stocks in Malaysia?
How can you trade stocks in the Malaysia market?
What is stock?
A stock is a security that represents the ownership of a fraction of the issuing corporation. Units of stock are called shares which entitles the owner to a proportion of the corporation's assets and profits equal to how much stock they own. Generally speaking, stocks can be bought and sold on stock exchanges, such as the Bursa Malaysia (used name KLSE: Kuala Lumpur Stock Exchange). Investors can open a brokerage account to trade stocks on the exchange.
Bursa Malaysia
Bursa Malaysia is the stock exchange in Malaysia. Being one of the largest bourses in ASEAN, Bursa Malaysia is based in Kuala Lumpur and was previously known as the Kuala Lumpur Stock Exchange (KLSE). It provides full integration of transactions, offering a wide range of currency exchange and related services, including trading, settlement, clearing, and savings services. It consists of a Main Board, a Second Board and MESDAQ (now ACE Market) with total market capitalization of (USD$397.39 billion).
Types of Stocks
In the Malaysia stock market, companies can issue different types of stocks. We will give simple explanations of growth stock, value stock, income stock, blue-chip stocks, and defensive stock.
Growth stock
Growth stocks are those stocks that investors expect to grow at a faster rate compared to their peers. However, it does not mean that growth stocks always outperform the market. They are more prone to have better turnover with economic expansion and low interest rates.
Value stock
Value stocks may be the other side of growth stocks, which are regarded as discounted stocks to what their performance might indicate. In other words, they may be undervalued and thus may be more appealing than the broader market. They are more prone to have better turnover with economic recovery.
Income stock
Income stocks are equity financial securities that pay regular and predictable dividends, generating a steady stream of dividend flows for investors. Theoretically, ideal income stocks are those with low volatility and a modest level of annual profit growth.
Blue-chip stocks
Blue-chip stocks are those stocks issued by a large, well-established, and financially sound company with a good reputation, that has a market cap in the billions. Although blue chip stocks may be smart additions to a portfolio, it is also crucial to diversify a portfolio beyond only blue chip stocks.
Defensive stock
As its name indicates, defensive stocks offer consistent dividends and relatively stable earnings even with a sluggish stock market, thus realizing the function of defense against market fluctuations or emergencies.
Why should you try stock investing in Malaysia?
Economic growth
As an upper middle-income country with its focus ranging from agriculture, and commerce to manufacturing and service, Malaysia saw a rapid recovery from the pandemic and its real growth hit 8.7% in 2022. Ushering to the year of 2023, the country has witnessed a 3.3% economic growth from a year earlier in the July to September quarter 2023, beating the median 3.0% growth forecast by Reuters. Despite the challenging global environment in 2023, the Malaysian economy is projected to expand by around 4% in 2023, and between 4% and 5% in 2024.
In addition, the inflation in Malaysia has been broadly cooling, though food inflation remains elevated.
Export and FDI
As an economy with a well-diversified export base of commodities and a heavy exposure to electronics manufacturing, Malaysia’s trade remains one of Asia’s outperformers.
Apart from its outstanding performance in exporting, Malaysia also remains in a favourable position in attracting high quality foreign direct investment (FDI). This Southeast Asian manufacturing hub saw its FDI approvals accounting for 4% of GDP, well ahead of ASEAN peers. Among others, China’s FDI footprint has expanded rapidly in Malaysia.
Can Malaysian users open accounts?
Yes, Malaysian users can open accounts to trade stocks or engage in other financial services, provided they meet the eligibility criteria set by the financial institution or brokerage firm, and comply with Malaysia's regulatory requirements. It is advisable for Malaysian users to confirm with the specific institution regarding the account opening process and necessary documentation.
FTSE Bursa Malaysia KLCI and Its Component in Malaysia
The FTSE Bursa Malaysia KLCI, also known as the Kuala Lumpur Composite Index, is a major stock market index in Malaysia that tracks the performance of the 30 largest companies listed on the Bursa Malaysia by full market capitalization. Widely used as a benchmark for the Malaysian stock market, FTSE Bursa Malaysia KLCI offers investors with an overall overview of the market's performance.
Eight steps to trade stocks online in Malaysia
To trade stocks online in Malaysia, follow these steps:
Open Accounts:
Open a trading account with a Participating Organisation (PO).
Open a Central Depository System (CDS) account, which will keep track of your share ownership.
Engage with a Licensed Dealer or Remisier:
You will be assigned to or need to engage a licensed dealer or a remisier who will handle your buy or sell orders.
Placing an Order:
Give an order to your remisier, specifying the number of shares to buy or sell and at what price.
Provide your CDS account number for the order to be entered into the system.
Order Entry:
Your orders are keyed into the Automated Trading System (ATS) at the PO.
Alternatively, orders can be entered via the PO’s internet trading system.
The order is relayed to Bursa Malaysia's trading engine and confirmation is routed back to the PO and to your internet trading system, if used.
Match Order:
Orders are matched automatically by Bursa Malaysia's system based on supply and demand.
Buy orders are matched at the keyed-in price or lower, while sell orders are matched at the same or higher price.
Trade Confirmation:
A trade confirmation slip is printed once the order is matched, detailing the transaction.
The remisier confirms with you the details of the shares bought or sold and the transaction price.
Different colored slips are used for buy and sell orders to prevent confusion.
Contract Notes:
The broking house sends out contract notes with transaction details, including brokerage fees, stamp duty, and clearing fees, as well as the cost of the purchase or sale proceeds.
Delivery and Settlement (T + 2):
Settlement occurs 2 trading days after the transaction (T+2), without physical delivery of shares.
Instead, shares are credited and debited to CDS accounts via a book entry system.
Sellers must ensure they have adequate shares in their CDS accounts for settlement.
Other information about stock market
Trading Hours & Opening/Closing Routine
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
Board lot sizes
When investing in stocks in Malaysia, the minimum requirement is 1 lot, which is equivalent to 100 shares. Here is an example: Suppose let’s say Bob decides to purchase 1 lot of RHBBANK(1066), and its share price is RM5.6 (As of 23/11/2023). Therefore, Bob needs to spend RM560 for this minimum transaction.
Source
https://api2.sgx.com/sites/default/files/2023-11/SGX%20Monthly%20Statistics%20Report%20Update%20%28For%20the%20month%20of%20Oct%202023%29_FA.pdf
https://sg.finance.yahoo.com/news/5-singaporean-blue-chip-stocks-094004747.html
https://www.ig.com/sg/indices/singapore-index
https://www.sgx.com/securities/trading