1) Investing Basics
Why Invest In Stocks?Investing is making your money work for you
by getting your money to generate more money. Investing in stocks
has consistently proven to be one of the most profitable forms of
investment available.The benefits include: Immediate Buy/Sell so
you can sell part of your investment any time. Very low transaction
cost. The freedom to work at your own place, at your pace in your
own time. Easy monitoring - log in to the market from anywhere in
the world. Being able to maximise returns whilst spreading your
risk. A predictable form of investment if you know what you're
doing. Putting you in control and freeing you of fund management
fees. Considerable tax advantages.Things to watch out for: The
market can be a volatile place. You must acquire knowledge of what
you are doing. You must monitor your investments. You must learn
the discipline to enter and exit the market on entry and exit
signals.Can Ordinary People Profit from the Stock Market?Many
people say things like "I'd love to get into the stock market" or
"If I had more money, I'd invest in stocks". Many people also
believe that to make a profit from the stock market you either need
to be rich already, be a full-time investment trader or be a
financial whiz.Not necessarily so.Let's take a look at three
different scenarios of ordinary people in the stock market to see
how they fared. This will let us view how the process works, the
different approaches, and how returns are generated.
Scenario 1John works in a manufacturing plant earning RM33,000 a
year. After rent, living and personal expenses, John has managed to
save RM1,500 over the past 6 months that he wants to invest in the
stock market. John buys 1,600 shares in ABC Mining at RM0.90 per
share (RM1,440). He also pays RM32.95 brokerage fees for buying the
shares. In total, John has invested RM1,472.95.Six months later
John decides to sell his shares. He has kept an eye on the
performance of ABC Mining and they have risen to RM1.19 a share.
John sells his shares for RM1,904. He also pays RM32.95 brokerage
fees for selling his shares, leaving him with RM1,871.05. That is a
profit of RM398.10.RM398.10 may not sound a lot, but remember John
only invested RM1,472.95 for 6 months, so he won't make a huge
return. Nevertheless, John made a 27% profit which is far better
than he would have made by putting the money into his savings
account.
Scenario 2May and Chong both work full-time in professional
jobs. Together, they earn RM120,000 per year. After mortgage
repayments, living and personal expenses May and Chong have managed
to put away RM5,000 that they want to now invest in the stock
market. They buy 1,500 shares in AAA Steel at RM1.48 a share
(RM2,220) and 1,500 shares in XY Manufacturing at RM1.33 a share
(RM1,995). They also pay RM65.90 brokerage fees for the two
transactions. Their total outlay is RM4,280.90.Over the next 12
months AAA Steel shares have risen to RM2.60 a share and XY
Manufacturing shares have moved to only RM1.38 a share. May and
Chong sell their shares for a total of RM5970. They pay their
broker RM65.90 and are left with RM5904.10. Their initial
investment was RM4,280.90. So, they make a profit of
RM1,623.20.
Scenario 3Aminah is retired, owns her own home and earns a
comfortable income from several long term investments. Aminah would
like to invest RM15,000 that she has set aside for buying
shares.Aminah selects a portfolio of 5 companies and aims to invest
around RM3,000 in each. Aminah buys 3,333 shares in ABC Mining at
RM0.90 a share (an investment of RM2,999.70). She also buys 2,027
shares in AAA Steel at RM1.48 a share (RM2,999.96) and 2,255 shares
in XY Manufacturing at RM1.33 a share (RM2,999.15). To complete her
portfolio, Aminah buys a further 2,912 shares in MM Multimedia at
RM1.03 a share (RM2,999.36) and 3,000 shares in BB Furniture at
RM1.00 a share (RM3,000). Aminah also pays RM164.75 brokerage fees
for buying the shares. In total, Aminah has invested RM1,5162.92.12
months later Aminah sells her shares. Four of the shares have
increased in value but BB Furniture has dropped to RM0.95 a share.
ABC Mining rose to RM1.19 a share returning RM3,966.27. AAA Steel
rose to RM2.60 a share returning RM5,270.20. XY Manufacturing rose
to RM1.38 a share returning RM3,111.90. MM Multimedia rose to
RM1.09 a share returning RM3,174.08. BB Furniture dropped to RM0.95
a share returning RM2,850. In total, Aminah's shares returned
RM18,372.45 less RM164.75 for brokerage. This gives a total of
RM18207.70, earning a profit of RM3,044.78.
Understanding The Stock MarketThe stock market is where the
shares in companies are bought and sold, providing companies
options to access capital, and investors opportunities to own a
share of the company and enjoy potential gains from the company's
future performance.The stock market offers people the ability to
generate a separate income stream apart from their daily jobs, or
income streams which are superior to those from traditional savings
deposits. But before you even think about buying and selling
shares, you must know the fundamentals of the stock market and of
trading.First time investors can become confused because of the
terminology that is used to describe various market functions.
These don't take long to learn.Click herefor your basic share
trading terms. Incidentally, one common confusion is over the terms
'stocks' and 'shares'. Actually, they both mean the same thing and
can be used interchangeably.The Role of Bursa MalaysiaYou can only
invest in stocks through a stock exchange, an organized marketplace
where stocks are bought and sold under strict rules, regulations
and guidelines. The Malaysian stock exchange is called Bursa
Malaysia. Bursa Malaysia has over 900 listed companies offering a
wide range of investment choices to local and global investors.
Companies are either listed on Bursa Malaysia Securities Main
Market or ACE Market.Raising Capital on the Stock MarketThe Stock
Market was created by companies wishing to raise capital for their
business. When someone says they have a listed company they mean
listed on Bursa Malaysia. All companies need cash to take advantage
of growth opportunities. Many start-up companies however find
themselves short of capital to fund expansion. One way to acquire
this cash is to publicly float the company. This involves selling
part of the company to private individual and institutional
investors who are then able to freely exchange these stocks on an
open market. Purchasing stocks in a company that is listed on the
stock market is done through an Initial Public Offering or IPO.Once
an IPO has been issued, you can contact the company (phone, fax or
email) for a copy of the Prospectus and complete the application to
apply for an allocation of shares. Or you can wait until the
company is floated and buy shares on the open market. Besides Bursa
Malaysia, stock brokers will also have information regarding
Initial Public Offerings.Companies that are already listed can also
raise additional money on the stock market by offering existing
stockholders the opportunity to buy more stocks in the company. For
example, a listed company wanting to raise additional capital might
issue one new share at 5sen each for every three shares an existing
investor owns.When you buy shares, you are buying a share in that
company and so you own a percentage of that company. When the
company makes a profit, you share in that profit in the form of a
dividend. Typically, the number of shares that have been issued
multiplied by the share price gives us how much a company is
worth.The Role Of A BrokerTo buy or sell shares on Bursa Malaysia,
you need to use a registered broker who is a member of Bursa
Malaysia. You cannot deal directly with Bursa Malaysia as only
brokers have direct access to the market. A broker acts as your
agent - much like a real estate agent that sells your house. He/she
earns a commission on the value of shares you trade - just like a
real estate agent earns commission on buying and selling houses for
people. A broker can also be involved in the listing of a new
company by underwriting the float and marketing the float to their
group of clients.There are many brokers to choose fromALLIANCE
INVESTMENT BANK BHD076-004Alor Setar Branch2nd Floor, Wisma
PKNK,Jalan Sultan Badlishah,05000, Alor SetarKedah Darul AmanTel:
04 - 731 7088 / 731 8270Fax: 04 - 731 8428
RHB INVESTMENT BANK BHD087-021Alor Setar Branch214-A, 214-B,
215-A dan 215-BMedan PutraJalan Putra05150, Alor SetarKedah Darul
AmanTel: 04 - 7209 888Fax: 04 - 7209 878
UOB KAY HIAN SECURITIES (M) SDN BHD078-007Alor Setar BranchLot
4, 5 & 5A1st Floor EMUM 55No. 55, Jalan GangsaKawasan
Perusahaan Mergong 2Seberang Jalan Putra5150, Alor SetarKedah Darul
AmanTel: 04 - 732 2111Fax: 04 - 732
2777Website:www.utrade.com.my
Reading Market ReportsAs a stock trader, you will begin to pay
more interest to the business section of your local newspaper. Most
feature a section that deals with Stock Market prices at close of
the previous day. In this section, you will come across the
following descriptions:Year's Highthe highest price for a
particular stock for the year.
Year's Lowthe lowest price for a particular stock for the
year.
Stock Codea unique numbering system to identify a particular
stock.
Stock Counterthe stocks listed on Bursa Malaysia.
Cls'ng (Closing)the closing price for a particular stock for
that particular trading day.
+/-the symbol for the increase or decrease in the stock price
for that particular day.
+/-%the symbol for the percentage increase or decrease in the
stock price.
Lots Tradedstocks are normally traded in board lots of 100
units; lots traded will tell you the number of lots traded on a
particular day.
Day's Highthe highest price for a stock in that trading day.
Day's Lowthe lowest price for a stock in that particular
day.
Div Yielda dividend yield is a method of valuing stocks; it is
calculated asCash Dividend per Stock= Dividend Yield
Market Stock Price
,
P/E Ratio(Price/Earnings Ratio)the information obtained from
this will enable you to make a performance comparison of a company
with that of the industry, and from one period to another. The
formula is:Current Market Price= P/E Ratio
Earnings Per Stock
Earning per stockamount of a company's earnings attributable to
each ordinary stock of that company.
M Cap(Market Capitalisation)this shows the total value of a
listed company's stocks based on the current market price;
calculated as:Stock's Market Price x Number of Stocks Issued
NTA per Stockthis indicates the value of assets backing the
stock of a company; calculated by:Net assets of a company
Number of ordinary stocks in it
Reading the stock market performance section of the newspaper is
an easy thing to do. You just need to do it a few times until you
begin to feel comfortable with it.Understanding IndicesA stock
market index is a single number calculated from the prices of many
different stocks. Index is also called indices when you talk about
more than one of them. Indices are used as benchmarks of stock
performance for portfolios like mutual funds.Some investment funds
(index funds) manage their portfolio so that their performance
mirrors (tracking) the performance of a stock market index or a
sector of the stock market.For example, when you hear that the
Consumer Price Index (CPI) for say, January to December 2005
increased by 3.0% to 109.1 compared with that of 105.9 in the same
period last year. This tells you that the change in retail prices
paid by households for goods and services increased in that period.
CPI is designed to provide a broad measure of changes in retail
prices.An index is a tool which enables investors to measure the
performance of a group of stocks from a defined market. It can form
a benchmark for active or passively managed portfolios covering the
particular market. Being part of an index is also a status symbol
for the constituent companies and trading of constituent shares
obviously supports the share price. Indices also allow the creation
of investment products that give investors exposure to markets or
groups of stocks which can help in markets where there are barriers
to investment.Stock market indices may be classed in many ways. A
broad-base index represents the performance of a whole stock market
and reflects how investors feel about the economy. The most
regularly quoted market indices are broad-base indices comprised of
the stocks of large companies listed on a nation's largest stock
exchanges, such as the American Dow Jones Industrial Average and
S&P 500 Index, the British FTSE 100, the French CAC 40, the
German DAX and the Japanese Nikkei 225.The Use of IndicesStock
indices have developed in the last twenty years to become much more
than economic indicators (market barometer) and with growing
developments in financial markets, more technical functions of
indices have been brought to the forefront.Stock indices are used
by investors and fund managers as one of the many tools to evaluate
the performance of a stock market The application of indices is now
much wider including the use of indices as benchmarks for investor
portfolio comparisons and as underlying components of financial
products, for example Exchange Traded Funds (ETFs) and
derivatives.Bursa Malaysia IndicesThe existing Bursa Malaysia
indices are calculated using the market capitalisation weighted
method.Market capitalisation means the total value of a listed
companies shares based on the current market price. Therefore the
bigger companies are given higher weightage compared to the smaller
companies.Understanding FTSEThe FTSE Bursa Malaysia Index
SeriesBursa Malaysia Bhd and FTSE Group joined forces in 2005 to
launch the FTSE Bursa Malaysia Index Series, a suite of tradable
and benchmark indices. The FTSE Bursa Malaysia Index Series is
designed to represent the performance of companies, providing
investors with a comprehensive and complementary set of indices,
which measure the performance of the major capital and industry
segments of the Malaysian and regional market.FTSE adopts
international index construction standards which are transparent.
Stocks will have to pass FTSE's basic requirements to be included
into the index. The index design basics are as follows:-i.
InvestableAll stocks are free float weighted to accurately
represent the stocks available for investment. Strategic
shareholdings such as by Directors and Founding Families,
Government, Cross Holdings by related companies and Holdings
subject to lock-in clauses will be excluded from free float
screening.ii. TradableAll stocks are liquidity screened to ensure
stock availability and ease of trading.iii. TransparentA clear and
predictable set of Ground Rules provides transparency and enables
easy understanding and anticipation of the management of the index
series.Today, the family tree comprises of:1. FTSE Bursa Malaysia
KLCI Index2. FTSE Bursa Malaysia EMAS Index3. FTSE Bursa Malaysia
Mid 70 Index4. FTSE Bursa Malaysia Top 100 Index5. FTSE Bursa
Malaysia Small Cap Index6. FTSE Bursa Malaysia Fledgling Index7.
FTSE Bursa Malaysia EMAS Shariah Index8. FTSE Bursa Malaysia Hijrah
Shariah Index9. FTSE Bursa Malaysia ACE Index10. FTSE Bursa
Malaysia Palm Oil Plantation Index11. FTSE Bursa Malaysia Asian
Palm Oil Plantation Index (USD)12. FTSE Bursa Malaysia Asian Palm
Oil Plantation Index (MYR)
FTSE Bursa Malaysia KLCIBursa Malaysia's Strategic
ObjectiveBursa Malaysia is committed towards extending the
Malaysian capital market's global reach by offering competitive
services and infrastructure through adoption of internationally
accepted standards which are globally relevant.As part of Bursa
Malaysia's strategic initiative, the Kuala Lumpur Composite Index
(KLCI) was enhanced to ensure that it remains robust in measuring
the national economy with growing linkage to the global economy.
Bursa Malaysia together with FTSE, its index partner, have
integrated the KLCI with internationally accepted index calculation
methodology to provide a more investable, tradable and
transparently managed index.The enhanced KLCI, whilst remaining
representative of the Malaysian stock market, provides a platform
for a wider range of investable and appealing opportunities.The
KLCI is now known as the FTSE Bursa Malaysia KLCI and the
enhancements were implemented on Monday, 6 July 2009.Selection of
FTSE Bursa Malaysia KLCI ConstituentsThe FTSE Bursa Malaysia KLCI
comprises the largest 30 companies listed on the Main Board by full
market capitalisation that meet the eligibility requirements of the
FTSE Bursa Malaysia Ground Rules.The two main eligibility
requirements stated in the FTSE Bursa Malaysia Ground Rules are the
free float and liquidity requirements as indicated below :- Free
FloatEach company is required to have a minimum free float of 15%.
The free float excludes restricted shareholding like cross
holdings, significant long term holdings by founders, their
families and/or directors, restricted employee share schemes,
government holdings and portfolio investments subject to a lock in
clause, for the duration of that clause. A free float factor is
applied to the market capitalisation of each company in accordance
with the banding specified in the FTSE Bursa Malaysia Ground Rules.
The factor is used to determine the attribution of the company's
market activities in the index. LiquidityA liquidity screen is
applied to ensure the company's stocks are liquid enough to be
traded. The method is based on the calculation of the stock's
median daily trading per month.
Calculation and Review of the FTSE Bursa Malaysia KLCIFTSE uses
the real time and closing prices sourced from Bursa Malaysia to
calculate the FTSE Bursa Malaysia KLCI. Calculation is based on a
value weighted formula and adjusted by a free float factor. The
FTSE Bursa Malaysia KLCI values are calculated and disseminated on
a real time basis every 15 seconds.The FTSE Bursa Malaysia KLCI is
reviewed by the FTSE Bursa Malaysia Index Advisory Committee on a
semi-annual basis in June and December. Full market capitalisation
data as at the last trading day of May and November is used for the
review. Any constituent changes will be implemented after close of
business on the 3rd Friday in June and December.Please refer to
theFTSE Bursa Malaysia Ground Rulesfor further information about
the eligibility, calculation and review criteria.Variation to the
Kuala Lumpur Composite Index Futures (FKLI) and Kuala Lumpur
Composite Index Options (OKLI) Contract SpecificationArising from
the transition of KLCI to FTSE Bursa Malaysia KLCI on the
Implementation Date, kindly take notice that the contract
specifications for FKLI and OKLI contracts (which are currently
stipulated in Schedule 6 and 7 respectively of the Rules of Bursa
Malaysia Derivatives Berhad ("Rules of Bursa Derivatives")) that
are created in the trading months as stated in the table below will
be varied with effect from 1 February 2009 in the manner set out in
paragraphs (i) and (ii) belowTrading MonthContract TypeContract
MonthUnderlying Index
aFeb 2009 - Apr 20092nd QuarterSept 2009The trading of the
contracts will be based on KLCI from 1 Feb 2009 until 3 Jul 2009,
and subsequently based on FTSE Bursa Malaysia KLCI till expiry.
bMay 20091st Quarter2nd QuarterSept 2009Dec 2009The trading of
the contracts will be based on KLCI until 3 Jul 2009, and
subsequently based on FTSE Bursa Malaysia KLCI till expiry.
cJun 2009Next Month1st Quarter2nd QuarterJul 2009Sept 2009Dec
2009The trading of the contracts will be based on KLCI until 3 Jul
2009, and subsequently based on FTSE Bursa Malaysia KLCI till
expiry.
dJul 2009Spot MonthNext Month1st Quarter2nd QuarterJul 2009Aug
2009Sep 2009Dec 2009The trading of the contracts will be based on
KLCI until 3 Jul 2009, and subsequently based on FTSE Bursa
Malaysia KLCI till expiry.
i. the 'UNDERLYING STOCK INDEX' as stipulated in Schedule 6 for
FKLI and as stipulated in Schedule 7 for OKLI is changed to read as
follows.'Kuala Lumpur Composite Index (from 1 February 2009 until 3
July 2009) FTSE Bursa Malaysia KLCI (from 6 July 2009 onwards)'ii.
to add 'ATTRIBUTION CLAUSE' as follows.'The FTSE Bursa Malaysia
KLCI Index is calculated by FTSE International Limited ("FTSE").All
intellectual property rights in the FTSE BURSA MALAYSIA KLCI vests
in FTSE and Bursa Malaysia Berhad ("BURSA MALAYSIA"). "FTSE",
"FT-SE" and "Footsie" are trade marks of the London Stock Exchange
Plc (the "LSE") and The Financial Times Limited ("FT") and are used
by FTSE under licence. "BURSA MALAYSIA", "Kuala Lumpur Composite
Index" and "KLCI" are trade marks of BURSA MALAYSIA.FTSE nor BURSA
MALAYSIA nor LSE nor FT makes any warranty or representation
whatsoever, expressly or impliedly, either as to the results to be
obtained from the use of the FTSE Bursa Malaysia KLCI and/or the
figure at which the FTSE Bursa Malaysia KLCI stands at any
particular time on any particular day or otherwise.'This
Attribution Clause is added for the use of FTSE Bursa Malaysia KLCI
as the underlying index for FKLI and OKLI by FTSE and its
partners.Strengths of the FTSE Bursa Malaysia KLCI1. The KLCI is
known as FTSE Bursa Malaysia KLCI to provide global relevance,
recognition and reach.2. A market barometer made up of primary
market movers will more aptly define market activities while
remaining representative of the Malaysian stock market.3. The FTSE
Bursa Malaysia index calculation methodology emphasises free float
and liquidity screens for a clearer representation of the market.4.
A smaller basket of 30 stocks makes it easier to manage and more
appealing for the creation of Index Linked products to promote
market liquidity.5. Increasing the frequency of index calculation
from every 60 seconds to every 15 seconds tracks the market pulse
closely and more efficiently.6. The continuity of the KLCI index
value preserves the historical movements of the Malaysian stock
market.
KLCI MilestonesThe barometer of the Malaysian stock market was
the Industrial Index which was launched on 2 January 1970. Its
constituents comprised of 30 industrial stocks and the base year
was 1970. By 1985, the Industrial Index was considered to be no
longer reflective of the stock market. The Exchange and industry
representatives agreed that the stock market needed an index that
was reflective of the market performance, sensitive to investors'
expectations, indicative of Government policy changes and
responsive to structural changes in the economy. This index is what
we now know as the KLSE Composite Index or KLCI.4 Apr 1986The KLCI
was launched as an open ended index with a total of 83 companies
and calculated three times a day. Trading volume criteria was 250
lots per annum.
30 Jan 1990Calculation frequency was increased to every 15
minutes.
29 May 1992Trading volume criteria was increased to 1,000 lots
per annum.
18 Apr 1995Number of constituents was increased to and fixed at
100 to accommodate the listing of stock index futures. Computation
frequency was increased to every 60 seconds
19 Mar 1998Enhancement to the objectives to better track the
economy
25 May 2005Discontinued the practice of adjusting index base for
dividends
6 Jul 2009Now known as FTSE Bursa Malaysia KLCI and adopts the
FTSE Bursa Malaysia Index calculation methodology
9 Jun 2011Enchancement to the liquidity screening rule to
further align the index to global standards.
OverviewBursa Malaysia and FTSE Group joined forces on 26 June
2006 to launch the market data.The market data is designed to
represent the performance of companies, providing investors with a
comprehensive and complementary set of indices, which measure the
performance of the major capital and industry segments of the
Malaysian and regional market.All Malaysian companies listed on the
Bursa Malaysia Main Market and ACE Market are eligible for
inclusion, subject to meeting FTSE's international standards of
free float, liquidity and investability. The FTSE Bursa Malaysia
index methodology allows investors to do cross border analysis and
comparison while a set of Ground Rules provides transparency to the
management of the index series.The index series covers all stock
sizes within the market and provides the investors with a better
tool to benchmark their investments. The indices are also suitable
for the creation of investment products such as ETFs, derivatives,
structured products and index tracking funds.
Getting A Stock PriceThe stock price is the market price of a
stock. Using the Bursa Malaysia website you can view the price for
any listed stock.Getting a PriceIt's good practice to explore the
market news wherever you can find it. Many of the terms will be
alien to you at this stage but familiarising yourself is all part
of the learning process.There are many places you can find market
news, for example: The financial section of the daily newspapers
Bursa Malaysia Website. Your broker website may have an up-to-date
list of stock prices Your telephone company may be able to send you
market updates via your mobile phoneIt is best to explore your
options and find services that best suit you.Types Of StocksWhat
types of stocks are there?Ordinary StocksWhen purchasing an
ordinary stock, you own a share of the company. This entitles you
to receive profits from the operations of the company in the form
of dividends. At the annual general meeting (also referred to as an
AGM), you have voting rights. Ordinary stocks are what you will
start to trade in and most traders never venture beyond this.
There are, however, other types of securities and these
are:Preferential StocksA preference stock is different from an
ordinary stock. Preference stockholders receive dividends before
dividends on ordinary stocks are announced. If the company is wound
up, preference stockholders rank above ordinary stockholders in the
distribution of assets. Preference stocks can often have a fixed
dividend rate.Bonus IssueThis is a free issue of stocks to the
stockholders based on the number of stocks already owned.Rights
IssueA rights issue can be granted to stockholders to buy stocks in
the company, often below market price.DerivativesThere are also
securities you can trade on the market that derive their price from
the parent stocks. There are two types - Options and Warrants - and
these are collectively known as Derivatives.There are two parties
involved in an options contract, the writer or seller and the taker
or buyer. The writer writes the option and has the obligation of
accepting or delivering the stocks. The takers have the right, but
not the obligation, to buy or sell the stocks.There are many
advantages of options trading, the least of which is leverage. An
option can be bought and sold for a fraction of the stock price,
giving an effective higher return (or loss) on investment for a
stock price move.WarrantsWarrants, like options, derive their price
from the parent security. Warrants though are issued by banks and
other financial institutions and are classified based on whether
they have an investment or trading purpose.Warrants may be issued
over securities, a portfolio of securities, a stock price index,
currency or commodities.Buying and Selling StocksThe thought of
buying and selling stocks can seem daunting for a beginner but it
is quite simple and will grow on you quite quickly once you have
some practice. One essential thing to know is that you must go
through a broker to buy and sell stocks, only a licensed broker can
deal directly with the stock market.Engaging a BrokerAside from
making the purchases, a broker can also advise you on your
purchases. However, you should not depend on them for market
knowledge, you must do your own research to succeed in the
market.Buying and Selling OnlineOnline brokers generally take less
commission than other brokers, making online trading a more
profitable alternative. Online trading does not come with expert
advice but does normally come with live market updates so you can
keep track of your purchases online and become an expert
yourself.
Application for an Initial Public OfferingThere are two methods
which you can apply for an IPO: Throughapplication formsat issuing
houses, stockbroking companies and financial institutions. And
sometimes through an Electronic Share Application (ESA) that allows
applicationsvia ATMs.Refer to the chart below for a further
understanding on how to apply for shares.
Before investing, ensure that: You know your risk profile. You
have sufficient additional funds. The necessity of the additional
funds has been considered.When To Buy And SellOne of the benefits
of investing in the stock market is that you can do it after
trading hours. Bursa Malaysia is open from 9am to 12.30pm, then
again from 2.30pm to 5pm but you can do research and place orders
outside these hours.So, let's say you go to work all day and only
have the evenings and weekends free. In the evenings you will
review what happened to the market that day and decide how to trade
the next day. If you miss a few nights during the week, you can do
your analysis on the weekend.There are two ways to place a buy or
sell order:At Market OrdersYou can only make 'at market' orders
during trading hours. If you do your research after trading hours
then you would put an order through with your broker as soon as the
market opens the next day. The purchase will then be made 'At
Market' price, which may be different from the price you found
during your research the night before.At Limit OrdersThe advantage
of 'At Limit' orders is that you set the maximum price you will buy
or the minimum price you will sell the share for. So, if you have
done your research that evening and decided that the most you want
to pay for the share is RM 1.20 then you place an 'At Limit' order
for 100 shares at RM1.20. If your broker can get the shares for
RM1.20 they will buy them for you. If not, they won't make the
trade.This practice is quite good if you want to control the amount
you are investing. The other advantage of buying 'At Limit' is that
you can place a buy/sell order outside market hours. Therefore,
your share trading business needs do not interfere with your
daytime job.
2) The Golden Rules
Start With A Financial PlanTrading stocks should be treated as a
business venture - it will require time, knowledge and money to
succeed. Your Financial Plan represents your roadmap to
success.Decide Your Financial Objectives.If you are a 60 year old
looking for cash flow to fund your impending retirement, your
priority would be to generate an income stream rather than large
asset value growth.If you are a 25 year old who wants to begin to
invest, capital growth would be the priority, rather than income
stream.Your financial objectives will determine whether you trade
liquid shares or not.Decide Your Risk Level.Decide on your risk
level and the types of investments you can afford to make will be
set. Remember, the higher the return you want to achieve, the
higher the risk.Low Risk LevelI am not very comfortable with risk
and will invest in fixed interest/capital guaranteed securities
(government bonds, bank term deposits).Medium Risk LevelI can take
on a moderate amount of risk (blue chip Industrial and Banking and
Finance sector shares).High Risk LevelI am comfortable with risk. I
am seeking a high return and prepared to evaluate companies early
in their growth phase (recently listed resource companies).
How Do You Fund Your Investments?For most of us, we do not have
immediate access to a large pool of ready savings. Using the equity
you have in a property to fund your share portfolio is a common
approach.EPF savings is also an effective vehicle for providing
funds for investing and the majority of Malaysians have access to
these funds.Most major banks and insurance groups offer margin loan
facilities. This is where you start a portfolio with savings and
then use this portfolio as security to borrow further funds to buy
more shares.In most instances, the problem is not acquiring funds
to start a portfolio, it is having the knowledge to invest with
confidence.Employ Risk Management StrategiesWith any investment, be
it stock trading, real estate or business, it is important that you
understand what the risks are and how to minimise your exposure to
these risks. This process is known as 'Risk Management'.The Three
Elements Of Risk ManagementSpread Your Risk: Don't Put All Your
Eggs In One BasketSpreading you risk is as simple as not putting
all your eggs in the one basket. This is called diversifying your
portfolio.Spread your capital so there is never more than 20% in a
single stock.Don't however take this to extremes and over-diversify
by investing in too many stocks at once. You cannot expect to
outperform the market if your portfolio closely matches the market.
A rule of thumb is to limit your portfolio to between 5 and
10stocks.Plan Your Exit: What Is An Acceptable Risk?Amateur traders
buy a stock and their focus is to hope it increases in price. If it
goes down, they continue to hold in the hope the price will
recover. When a professional buys a stock they recognise that
success is a probability, not a certainty. At the time of entering
the trade they establish an Early Exit price. If the stock falls
past this point the good investor will immediately exit and never
run the risk of making a large loss.Maintaining your capital is
fundamental to successful trading. If you invest in a stock and
make a large loss, then it is impossible to consistently profit
from the stock market. Having incurred a large loss, you must now
make a large profit just to break even. The key to successful
trading is keeping your losses small.Stop The Loss: Don't Drive
Without A SeatbeltThe second must sell signal is a Stop Loss. Just
tracks the highest price reached by the share since purchase. If
the share falls by more than 10% from this price, it is time to
sell. We suggest 10% - you can change this depending on your
trading style. Too small a percentage and it will get you out too
early. Make the percentage too large and you give back too much of
your profits before exiting. Start with a 10% fall and see what you
feel comfortable with.Always Trade With The TrendTrends are the
cornerstone of trading. If a share price is rising, we can make
money by buying that share. If the share price is falling, we need
to look for other opportunities. It does not make sense to buy a
falling share. Our aim is always simple find a share in an uptrend
and take a large chunk from the middle of the trend.Overall Market
StrengthIt is important to look at how the overall market is doing.
This can be gauged by looking at the top 500 shares, otherwise
known as All Ordinaries. If All Ordinaries go up, it is because
stocks in the top 500 have risen and the market is in an
uptrend.There are over 900 companies listed on the Bursa Malaysia
that you can invest in. To examine each one individually would take
a great deal of time. Instead, you trade with the trend and find
the strong sectors in the market.Strength of an Industry SectorWhat
is a Sector?A sector is a group of companies involved in the same
industry. For example, mining companies are grouped together in the
Materials sector while banking companies are in the Finance sector.
Entire sectors are generally affected by economic conditions so
entire sectors tend to trend in the same directions. Trends do not
have hard and fast rules, individual stocks within these sectors
will perform at different levels.Strength of Shares in a
SectorAlthough the general rule of novice investors is to buy on an
uptrend, there are people who buy during a downtrend as a strategy.
This is a process of buying more shares as the price falls, so the
average cost of the share is reduced with every purchase. This kind
of bargain hunting is a riskier strategy, as the stock price may
never recover. The second downside is that the price may fall and
then stabilize, meaning the investor may have to wait for a while
before recovering losses or making a profit. In this scenario,
capital that could be used for profitable trading would be lying
idle.Resistance to this type of trading is not new. One of the
greatest traders of the last century, Jesse Livermore wrote,
"Experience has proven to me that the real money made in
speculating has been commitments in a stock showing a profit right
from the start."By now you should understand that trading with the
trend is critical to success. Also, our objective is never to buy
at the bottom or sell at the top of a trend. We simply want to take
a large chunk out of the middle. Let the trend be your friend.Dont
Buy And HoldThe Malaysian stock market is one of the strongest and
sometimes most dynamic markets in the world.While the market has
always recovered from falls, the same cannot be said for individual
companies. Even during a booming market, some companies can suffer
significant losses.Trade only on an uptrend and sell the poor
performers, this will make it impossible to experience a large
loss. This is the secret to outperforming the market and achieving
a consistently superior return.Undertake some research on the Bursa
Malaysia or in a local investment paper. List three shares that
have showed decreased performance recently and three shares that
have showed increased performance recently.Trade Only Liquid
StocksLook at the column called Lots Done in your market report.
This is the amount of stocks that were traded on the day. If you
multiply this by the price of the stock, you can see how much money
actually changed hands on that day. If this amount is high, then
the stock is very liquid, meaning it is easy to buy and more
importantly, easy to sell. The last thing you want once you've
bought a stock is to be stuck with it because you can't find a
buyer.For example, if a company has traded 100,000 stocks today and
the closing price was RM2.42, we can estimate that RM242,000 worth
of that stock changed hands today.For example:Innovics' last price
was RM 0.30 and Lots Done were 1000. This means that an average of
RM 3,000 worth of stock changed hands today. In other words,
Innovics is only trading an average of RM3,000 of shares each
day.Now, you own RM10,000 worth of Innovonics and you want to sell.
If you enter your sell order on the market, you will inject 3 days
worth of turnover onto the market. There will not be enough buyers
for you to immediately sell the stock at your chosen exit price.To
ensure you invest in liquid shares, only trade stocks that show a
daily turnover of at least ten times what you are planning to
invest. If you are investing RM10,000 in a stock, look for an
average daily turnover minimum of RM 100,000.Develop Your Own
Trading PlanTrading is about probabilities, not certainties. A
Trading Plan establishes a series of steps that ensure a higher
probability of success.The Plan will set certain guidelines for:
What stocks to buy When to buy When to sellThe Structure of Your
Trading PlanA Strong Market:Before deciding what to buy, first
establish if the market is in a positive phase. If the KL Composite
Market has been negative over recent weeks (or longer), it is not a
good time to enter the market. If the majority of stocks are going
down or sideways, the probability of you buying a share that is
going to rise in the immediate future is slim.A Strong
Sector:Having waited until the market is in a growth phase,
determine if there are any sectors showing strong growth in the
past few weeks. These are the sectors that have stocks performing
well and are increasing in price.Examine stocks in these strong
sectors and determine those that are on an uptrend, meaning the
price of the stock has been steadily going up for at least 3
months.These stocks will qualify as having potential for ongoing
growth as they are generating positive market sentiment. If they
have adequate liquidity on top of that, you could add any of these
to your portfolio knowing that you could exit quickly at any point
in time.Exit Strategy:Having selected shares to include in your
portfolio you must then have an Exit Strategy in the event that
these shares show signs of reversing. Simply set an Early Exit
price to ensure that the stocks you buy never generate losses.This
is a simple description of a Trading Plan. It holds the basics for
selecting stocks that have a good probability of increasing in
price and risk management to protect your capital. These three
ingredients are the key to success in stock trading.
Account Opening What is a Central Depository System?The CDS acts
as a means of representing ownership and movement of securities.
CDS account holders enjoy the conveniences if obtaining electronic
securities transfer and trade settlement.
Who may open a CDS account?The CDS account may be opened by:a.
An individual who has reached the age of eighteen (18) years as of
the application date.b. A corporation within the context of Section
4 of the Companies Act 1965.c. Any corporate body that is
incorporated within Malaysia and is by notice, published in the
Gazette, declared as a public authority or an instrument or agency
of the Government of Malaysia or of any Malaysian State.d. A
society under any written law relating to co-operative societies.e.
A trustee or trust corporation duly constituted under any written
law.f. Any society registered under the Societies Act 1966.g.
Statutory bodies incorporated under an Act of Parliament.In
general, a CDS account can only be opened if the persons are
opening it either as a beneficial owner or as an Authorised
Nominee.
Why do I need to open a CDS account?You need to open a CDs
account to buy and/or sell shares, and to carry out other CDS
transactions on all equity and non equity counters (i.e. bonds,
loan sticks, warrants, etc.) which have been prescribed into the
CDS.
How do I open a CDS account?You can open a CDS account with any
Authorised Depository Agents (ADAs). All stockbroking companies in
Malaysia are currently ADAs.If you are anindividual investor, you
may go to an ADA of your choice and:a. Complete the Opening of
Account form and two (2) Specimen Signature Cards.b. For
Malaysians, submit the documents together with two (2) certified
true copies of your Malaysian National Registration Identity Card
(NRIC). As for foreigners, you need to pay the Account Opening fee
and submit two (2) certified true copies of your passport.If you
are acorporate investor, you are required to:a. Complete the
Opening of Account form and two (2) Specimen Signature Cards.b.
Submit the above documents with two (2) copies of all necessary
supporting documents (e.g. Certificate of Incorporation, Board
Resolution, etc) together with the Account Opening fee.Your ADA
will then open the CDS account and give you your CDS account
number. Bursa Malaysia Depository Sdn Bhd will send you an account
opening confirmation notice by ordinary mail.
When do I need to formalize an account? If you had applied for
Initial Public Offering without a CDS account prior to December
2003 and was successful in your application, Bursa Malaysia
Depository Sdn Bhd would have opened a CDS account on your behalf
with the broker of your choice. Bursa Malaysia Depository would
have informed you of the account and the need for you to formalise
the opening of the account by submitting the relevant documents and
by paying the Account Opening fee. The account cannot be utilised
until all these formalities are complied with.
How do I open a CDS account if I cannot be present in
person?Pursuant to Rule 25.01 (1A) of the Rules of Bursa Malaysia
Depository, it is mandatory for an individual to be present in
person before the ADA if he intends to open or formalise a
securities account. In the event that he is unable to do so, the
ADA may be pursuant to Rule 5.02A (2) expressly waive the
requirement to be present in person. The ADA may instead permit the
investor to submit the relevant account opening form (available at
all ADAs) and present his documents for verification in front of
any of the following people who are also required to witness or
certify the supporting documents:a. Dealer's representativeb.
Authorised Officer of an ADAc. Authorised Officer of an Exempt
Dealerd. Authorised Officer of a Malaysian Embassy/High Commission
Consulatee. Notary Public (in the absence of a Notary Public in
applicant's country, the authorized officers of a licensed
stockbroking company or the lawyers* of that country may be allowed
to verify)f. Others as approved by Bursa Malaysia Depository
Can I open more than one CDS account?An individual investor is
allowed to open only one (1) CDS account with each ADA. However, a
corporate investor may open multiple accounts with the same
ADA.
Can a permanent resident of Malaysia apply for a CDS
account?Yes, they may. You may refer to Q2 for more
information.
Updating Account Particulars How do I change my particulars? You
may change your personal particulars (name, investor type,
registered address, etc) and also your account particulars
(correspondence address, account qualifier and telephone number).
All you need to do is complete the Application for Updating of
Account Particulars form, and hand it over to your ADA who will
then do the rest.
What should I do if I wish to update my signature?Whether you
are an individual investor or a corporate body, you are required to
submit an official letter expressing your intention of updating the
signature to your respective ADA.Individual investorswho wish to do
so must be present before the ADA, bringing along the letter
officially expressing the intention of updating the signature.The
letter should contain the following:a. The CDS account numberb. The
"old" and the "new" signaturec. The "new" signature's effective
date of useFor acorporate investor, a letter duly signed by the
person appointed to operate the account pursuant to Board
Resolution of the company or a new Board Resolution on the update,
is to be submitted.
Why is the notice on a successful update or particulars in a CDS
account sent to both the correspondence and the registered
addresses?Bursa Malaysia Depository sends such Notice to both the
registered and correspondence addresses when both the addresses
differ. This is one of the security measures built in the CDS to
protect any unauthorised updates and also to protect the interest
of the account holder.Closing of Account How do I close my CDS
account?An account may only be closed if there are no outstanding
transactions/balances remaining in that account. You can complete
and submit the Application for Closing of Account form or write a
letter to your ADA, stating your request to close the CDS
account.CDS Account Statements When do I receive the CDS statement
of account?You will receive a monthly statement of account in
respect of the preceding month which has an entry in the CDS
account. However, when there are no entries but there are shares in
your CDS account, Bursa Depository shall issue the statement in the
month of June and December.
What is a statement cycle? A statement cycle is a period which
is pre-determined by the system with the purpose of generating the
statement of account. Depositors' statement of account cycles are
assigned to either the 7th, 14th or 21st of each month. ADAs'
principle and nominee accounts are assigned to the 28th of each
month.
Why are the shares I recently bought not reflected in my latest
statement of account?If the settlement date falls after the date of
your statement cycle, the transaction will be reflected in your
next statement of account.
How do I request for a backdated copy of my statement of
account? You may request for a copy from your ADA if the date of
the statement is less than one (1) year from the date of retrieval.
The ADA may charge you for this service. If the date of the
statement goes back to more than one (1) year from the date of
retrieval, you must request it from Bursa Depository by way if
letter. Charges are applicable
What are the possible reasons for failure to receive the
statement of account?It may be due to the following
circumstances:a. When investors' correspondence address is not
updated with his ADAb. When the CDS account is not yet formalizedc.
When there has been no debit or credit entry into the CDS account,
during that particular month
Transfers How limited is my request to initiate a
transfer?Effective 1st September 1998, any transfer requests must
be within the approved reasons of transfer prescribed by Bursa
Malaysia Depository.
Can I initiate a transfer of a counter which is suspended from
trading?Yes, you can, provided it falls within the approved
reasons.
What are the changes done to the transfer process by Bursa
Malaysia Depository on 30th December 2002?The changes are as
follows:a. Introduction of new Transfer of Securities Request form
which incorporates more user-friendly features and also a
declaration clause.b. The cut-off time for depositors to lodge
their transfer related documents with their respective ADA/ADM has
been extended form 12.00pm to 3.00pm.c. The previous ten (10)
approved reasons have been reclassified to two (2) broad
categories.i. No Change in Beneficial OwnershipThis category of
approved reason for transfer caters for transfers that result in no
change in the beneficial ownership of securities. Under this
category of approved reasons for transfer, the name of the
beneficial owner is transparent and identical at both the
securities accounts of the transferor and transferee, thus no
supporting document is required.ii. Change in Beneficial
OwnershipThis category of approved reason for transfer covers
scenarios such as transfers pursuant to General Offer, transfers
between family members, transfers arising from pledging of
securities, transfers involving Government Authorities and
transfers that require prior approval from Bursa Malaysia
Depository. Except for transfers involving Government Authorities,
the rest of the approved reasons in this category would require
supporting documents.
Can I still use the old transfer form to initiate transfer of
securities request?No. It is mandatory for all transfer of
securities request executed by the transferor after 30th December
2002, to include the declaration clause that is pre-printed on the
new transfer request form.
In relation to transfers between family members' CDS accounts,
what are the scenarios or relationships allowed by Bursa Malaysia
Depository?Bursa Malaysia Depository only allows transfers between
the transferor (the person who initiates the transfer) and
transferee (the person who receives the transferred securities),
who are immediate family members. Here are the following
relationships allowed:a. Parentsb. Children/Adopted childrenc.
Spoused. Brotherse. Sistersf. Grandparentsg.
GrandchildrenIndividual depositors are also able to transfer
securities from their CDS accounts held directly in the name of the
individual depositor or nominee accounts held by an Authorised
Nominee (where the individual depositors are indicated as
beneficial owners) to CDS accounts held directly in the name of
their family members. They will be required to enclose the relevant
supporting documents when initiating such transfers.However,
transferring of securities from the depositors' Pledged Securities
Accounts directly to their family members' CDS accounts are not
permitted.However, transferring of securities from the depositors'
Pledged Securities Accounts directly to their family members' CDS
accounts are not permitted.
When will the transfer of securities be reflected in the CDS
account?Once the transferor submits the completed Transfer of
Securities Request form to his ADA, the ADA concerned will verify
all the documentation to ensure that they are in order and then
enter the relevant information into the CDS. Upon successful
execution of the transfer request in the CDS, the transferor's CDS
account will be debited and the transferee's CDS account will be
credited immediately.Account Balance Inquiry Can I still obtain my
account balance if I do not wish to pay for an ad-hoc
statement?Yes, you can by completing a Balance Inquiry Request form
available at your ADA. You will be given your latest CDS account
balance without the transaction details.
Can my dealer's representative have access to my account
balance?IN accordance with the Rules of Bursa Malaysia Depository,
you can authorise your dealer's representative to inquire your CDS
account balance for a specific period or indefinitely, unless
revoked earlier by you.
Can I inquire my stock balance from my stockbroking company via
telephone?In the interest of protecting the confidentiality and
security of your CDS account, you are not encouraged to verify your
stock balance with the ADA via telephone. Instead you are required
to complete and submit a Balance Inquiry Request form to your ADA,
where your signature or those of your authorised signatories will
be verified.Corporate Action Can I use an authorised nominee
account to apply for an IPO?No. These authorised nominee accounts
are opened by the ADA's nominee company and is effectively owned
and operated by the ADA on behalf of its client. If you are an
individual IPO applicant, you must use your own individual CDS
account. Margin accounts are also not allowed to be used when
applying for an IPO.
How is my entitlement from a corporate action determined?
Whenever a corporate action is announced by the relevant issuer,
Bursa Malaysia Depository will provide the Record of Depositors
(ROD) as of the lodgment date of the corporate action to the Issuer
or the Share Registrar of the Company. The ROD contains information
on the CDS account holders and the number of shares to their credit
as at the lodgment date. Based on this information, the issuer will
determine the entitlement of each of its shareholder and instruct
Bursa Malaysia Depository to credit the relevant CDS accounts with
the appropriate number of shares.
When will my CDS account be credited with securities arising
from corporate actions, i.e. Rights Issue, Bonus Issue, etc?These
securities will be credited into your CDS account on the eve of the
listing of the underlying securities on the Stock Exchange or on
any other date as instructed by the relevant authorities.
Can I request for the underlying securities due to myself,
arising from a corporate action exercise to be issued in the form
of certificates?No. Under Section 38 of Securities Industry
(Central Depositories) Act 1991 (Amendment 1998), securities due to
you as a result of any corporate exercise will be credited into
your CDS account. There will be no issuance of physical
certificates.
Dormant Account What is a dormant account?An account is
designated as dormant when there is nil balance in the account and
there has not been any debit or credit entry in the depositor's
account in the 36 months after the date of nil balance.
Why does Bursa Malaysia Depository designate an account as
dormant?Bursa Malaysia Depository is continuously striving to
enhance the security of your CDS account. Designating relevant
accounts as dormant will restrict unauthorised transactions.
What is the effect of my account being dormant?Once your account
is designated as dormant, you will not be able to use that account
to perform any kind of CDS transactions under the Rules of Bursa
Malaysia Depository. However, you may use your dormant account in
your application for Initial Public Offering (IPOs) and corporate
actions. You will not receive any Statement of Account until your
account is reactivated.
Can my dormant account still be used to apply for IPOs or
corporate actions?Yes, you may use your dormant account to apply
for IPOs. The same also applies for corporate actions. However, the
status of your account will remain as dormant until you reactivate
it.
Will I be notified before my CDS account is designated as
dormant?Yes, one month prior to the designation of an account to
dormant status, Bursa Malaysia Depository will issue a notice to
inform you.
When I receive the notice, what steps may I take to prevent my
account from being dormant?To ensure that your account remains
active and is not designated as dormant, you may perform any CDS
transaction which involves any debit or credit book entries in your
account, prior to the effective date of dormancy. Will I be
notified again once my CDS account has been designated as
dormant?No, Bursa Malaysia Depository will only be sending a
one-time notice to you one (1) month prior to the effective date of
dormancy.
If my CDS account is dormant, can I still request to update my
particulars?Yes, you may update your particulars in your CDS
account by completing the Application for updating of Account
Particulars form and by submitting it to the ADA where your account
is maintained.
How do I reactivate my dormant account?To reactivate your
account, you are required to submit a written request or the
completed Application for Reactivation of CDS Account form with
supporting documents (if any) to the ADA where your dormant account
is maintained.
Must I be present before the ADA to reactivate my dormant
account?No, you don't have to be present.Inactive Accounts What is
an inactive account?An account is said to be inactive when there
are deposited securities in the account but with no debit or credit
entries in the depositor's account for at least 36 consecutive
months from the date of the last entry made.
Why does Bursa Malaysia Depository designate an account as
'inactive'?Bursa Malaysia Depository is continuously striving to
enhance the security of your CDS account. Designating relevant
accounts as inactive will restrict unauthorised transactions.
What is the effect of my account being inactive?Once your
account has been designated as inactive, you may continue to
perform all forms of CDS transactions which are available to the
depositors except for outward transfers and trade activities.
What will happen to the securities held in my CDS account after
it is designated as 'inactive'?Your securities will still remain in
your CDS account after your account is designated as inactive.
Can I still use my inactive account to apply for IPOs or
corporate actions?Yes, you may use your inactive account to apply
for IPOs. The same also applies for corporate actions. However, the
status of your account will remain unchanged.
Will I receive any statement of account after my CDS account is
deemed inactive?Yes, Bursa Malaysia Depository will continue to
send the Statement of Account on a half-yearly basis after your
account is designated as inactive.
Will I receive entitlements such as Dividends or Bonus Issues
after my CDS account has been designated as 'inactive'?Yes, if you
are eligible to receive any entitlement, the entitled securities
will be credited into your inactive account.
Will I be notified before my CDS account is designated as
'inactive'?Yes, one month prior to the designation of an account to
an inactive status, Bursa Malaysia Depository will issue a notice
to inform you of the same.
When I receive the notice, what steps may I take to prevent my
account from being deemed inactive?The designation of an account to
an inactive status is to provide added security and protection to
long-term investors. However, if you wish for your account to
remain active, it will, if there are debit or credit entries in
your account, prior to the date of inactivation stated in the
notice sent to you.
Will I be notified again once my CDS account has been designated
as ' inactive'?No, Bursa Malaysia Depository will only be sending a
one-time notice to you one month prior to the date of inactivation.
Nevertheless, the half-yearly Statement of Account sent by Bursa
Malaysia Depository will indicate the status of your account as
'inactive'.
If my CDS account is deemed inactive, can I still request to
update my particulars?Yes, you may update your particulars in your
CDS account by completing the Application for Updating of Account
Particulars form and submitting it to your ADA where your inactive
account is maintained.
How do I reactivate my account?To reactivate your account, you
are required to submit a written request or the completed
Application for Reactivation of CDS Account form to the ADA where
your inactive account is maintained.
Must I be present before the ADA to reactivate my account?No,
you don not need be present.
How long does it take to reactivate my inactive account?Your
inactive account will be reactivated within two (2) market days
from the date of application.
Will there be a fee for reactivation?No, there will be no fee
imposed.
Will I be notified after my CDS account has been
reactivated?Yes, after your CDS account has been successfully
reactivated, Bursa Malaysia Depository will send you a notice to
inform you.Withdrawal Are there any exceptions to the prohibitions
of withdrawals, since its inception on 1st September 1998?A
depositor shall not withdraw deposited securities from the Central
Depository safe except in the following circumstances:a. To
facilitate share buy backb. To facilitate conversion of debt
securitiesc. To facilitate company restructuring processesd. To
facilitate rectification of errorse. When a corporate body is
removed from the official list of a stock exchangef. In any other
circumstances determined by the Central Depository from time to
time, after consultation with the Securities Commission
Electronic Share Application (ESA) What is Electronic Share
Application (ESA)? Electronic Share Application (ESA) is a facility
that allows for application of Initial Public Offering (IPO)
through an Automated Teller Machine (ATM) of the participating
financial institutions. This facility is provided by both the MIDF
Corporate & Consultancy Services Sdn Bhd (MIDFCCS) and the
Issuing Houses (IH), i.e. Malaysian Issuing House Sdn Bhd. In a
nutshell, ESA is a mode of applying for IPOs in a paperless
manner.
Which financial institutions provide the ESA facility?It is
provided by financial institutions which have formulated the
handling of IPO processes with the Issuing House. IN the context of
ESA, these financial institutions are commonly known as
Participating Financial Institutions (PFI), which are:a. Affin Bank
Berhadb. Ambank (M) Berhadc. CIMB Bank Berhadd. HSBC Bank Malaysia
Berhade. Malayan Banking Berhadf. Public Bank Berhadg. RHB Bank
Berhadh. Standard Charted Bank Malaysia Berhad (selected
branches)
What are the pre-requisites for an IPO applicant using ESA?All
you need is:a. A banking account and a valid ATM card with the
PFIb. A CDS account directly under the name of the applicant, which
is opened with any of Bursa Malaysia Depository's Authorised
Depository Agent (i.e. stockbroking companies)
What are the conditions governing the ESA operations?The
respective PFI will set out the procedures and instructions on the
usage of the ESA facility. Similarly, the ESA Terms and Conditions
can be found in the prospectus issued by the IPO Offeror.
How do I use the ESA facility?Each PFI may have different
procedures in using the ESA facility through its ATM. Therefore,
you are advised to check with the relevant PFI for detailed
procedures in using ESA facility for an IPO application.
How does the ESA facility function during an IPO?In brief, the
IPO applicant will apply for a specific IPO by entering the
appropriate details via the PFI's ATM. Once the details been
entered successfully, the applicant's banking account will be
debited for the appropriate amount accordingly. The PFI will then
collate all the ESA applications of its account holders and forward
them to the relevant Issuing House for processing and
balloting.
What will happen in the event of a successful IPO application
via ESA?Upon completion of the balloting process, the CDS account
of the successful applicant will be credited with the appropriate
amount of shares allotted. The applicant will also receive a Notice
of Allotment from the IH confirming the quantity of shares to be
credited into his CDS account.
What will happen in the event of an unsuccessful IPO application
via ESA?Upon completion of the balloting process, the IH will issue
an instruction to the relevant PFI on all its account holders'
unsuccessful applications. The PFI upon receiving this instruction
from the IH will credit the appropriate amount back into the
banking account of the unsuccessful applicant.Note:The above FAQ on
ESA facility is only intended to provide IPO applicants with a
brief overview on the ESA facility. The procedures and guidelines
governing the operations of ESA facility may vary from one PFI to
another. If in doubt, applicants are encouraged to seek necessary
clarification on the usage of the ESA facility directly from the
respective PFI or Issuing House.
Transmission of Title Who is authorised to liaise with Bursa
Malaysia Depository with regards to the CDS account(s) of a
deceased depositor?Bursa Malaysia Depository can only liaise with
the following personal representatives in terms of balance enquiry,
closing of accounts, and transfer of securities:a. Beneficiary
named in the Distribution Orderb. Executor/Administrator appointed
pursuant to Grant of Representation
Can the CDS account of a deceased depositor be suspended if
wanted to?Yes, the next of kin of the deceased depositor may
suspend the CDS account by carrying out the following procedures:a.
Notifying the Bursa Malaysia Depository in writing, of the death of
the depositorb. Submitting the following documents to Bursa
Malaysia Depository:i. A duly executed Suspension/Release of
Suspension of Securities Request formii. A certified true copy of
the deceased's death certificateiii. A certified true copy of the
next of kin's NRICiv. A certified true copy of marriage
certificate/birth certificate of the next of kin to prove the
relationship with the deceasedThe form must be executed before a
Notary Public/Advocate & Solicitor/any of the CDS officers of
the ADA in Malaysia. The above mentioned documents must also be
certified true by the same witness who witnesses the execution of
the said form.
What is the procedure for transferring securities in the case of
a deceased depositor?Procedures are as follows:a. Upon the
extraction of the Grant of Representation (GOP), Letter of
Administration (LA) or the Distribution Order, transfer of
securities from the deceased depositor's account may be performed
by the executor/administrator appointed pursuant to the GOP or the
beneficiary named in the Distribution Order, who must be personally
present before an officer of Bursa Malaysia Depository to execute
the relevant transfer form.Please note that the GOP/LA obtained
from other countries have to be duly resealed in the High Court of
Malaysia.b. Submit the following documents to Bursa Malaysia
Depository for verification:i. Certified true copy of the death
certificateii. Original or certified true copies of the
GOP/LA/Distribution Orderiii. Original or certified true copies of
NRIC of the executor/administrator or beneficiary named in the
Distribution Orderc. Pay the RM10transfer fee and RM50 processing
fee
What if the executor/administrator/beneficiary cannot be present
at Bursa Malaysia Depository?In the event that the executor /
administrator / beneficiary is unable to be present at Bursa
Malaysia Depository, they may write to Bursa Malaysia Depository
for a waiver of their presence at Bursa Malaysia Depository and
state the name of the ADA where they wish to execute the relevant
form. Documents as per Q3 must also be submitted together with the
said letter.
What if the executor/administrator/beneficiary resides outside
of Malaysia?In the event that the executor / administrator /
beneficiary reside outside of Malaysia, they may write to Bursa
Malaysia Depository for a waiver of their presence at Bursa
Malaysia Depository. Documents as per Q3 must also be submitted
together with the said letter. Bursa Malaysia Depository will then
send them the relevant form for their execution before a Notary
Public.Delisted SecuritiesFor Depositors What happens to the
delisted securities in my CDS account?Delisted securities in your
CDS account will continue to be deposited with Bursa Malaysia
Depository Sdn Bhd.
Can I keep delisted securities in my CDS account?Yes, you
can.
What are the advantages of keeping delisted securities in my CDS
account?Your securities are kept securely by Bursa Malaysia
Depository thus avoiding the need for handling physical scrip and
the possibility of misplacing them. Apart from that, you will also
continue to enjoy all the CDS facilities extended by Bursa Malaysia
Depository to its account holders.
Will I incur any fees if I maintain delisted securities in my
CDS account?Presently, you are not subject to any fees for
maintaining delisted securities in your CDS account.
Am I allowed to trade the delisted securities on the stock
exchange?No, you are not allowed to trade securities which have
been delisted from the Stock Exchange.
Will the delisted securities in my CDS account still be
reflected in the CDS statement of account?Yes, it will.
Will I continue receiving my CDS statement of account if it
contains only delisted securities?Yes, you will continue to receive
the CDS statement of account every half yearly.
Is the inactive account status applicable to CDS accounts
holding only delisted securities?Yes, a CDS account holding only
delisted securities will be designated as inactive if there are no
CDS activities for 36 consecutive months.
Am I allowed to transfer delisted securities?Yes, you may
transfer your delisted securities to another CDS account by
submitting the duly completed Transfer of Securities Request Form
(FTF010) to your Authorised Depository Agent (ADA), where your CDS
account holding your delisted securities is maintained.
Will the transfer of delisted securities be subject to Bursa
Malaysia Depository's approved reasons for transfer?No, the
approved reasons for transfer are only applicable to listed
securities. Delisted securities are not subject to this
requirement.
Am I allowed to withdraw delisted securities from my CDS
account?Yes, you can.
How do I withdraw delisted securities?To withdraw, you need to
do the following:a. Complete and submit the Securities Withdrawal
Request form (FWT010)b. Complete the Form of Transfer of Securities
(Form 32A) with sufficient stamp duty affixedc. Submit the duly
completed FWT010, Form 32A and the appropriate withdrawal fee to
the ADA which maintains your CDS account holding for further
processing.
Where can I obtain the FWT010 Form and Form 32A?You can obtain
both forms from your ADA.
How much does it cost to withdraw delisted securities?Currently
the withdrawal fee is RM15 per 1000 securities or part thereof. In
addition, there is a stamp duty charge for executing Form 32A. The
stamp duty will be charged according to the prescribed rate in the
Stamp Act 1949.
Will I be entitled to any corporate action announced by the
delisted company in future?Your entitlement as a shareholder will
be decided by the Issuer.
What will happen to delisted securities that are pledged to the
bank?This will depend on your arrangements with the bank.
Therefore, you should seek their advice on this matter.
What will happen to my unclaimed securities if Jabatan Akauntan
Negara approves my claim after the delisting date?Bursa Malaysia
Depository will follow the relevant directive from the regulators
on this matter.For Issuers Can we request for the Record of
Depositors (ROD)?Yes, you can. Bursa Malaysia Depository will
continue producing the ROD upon receiving a formal request from
either the Issuer or Share Registrar. This is subject to the
requester paying the appropriate ROD fees.
Will we incur any fees if we maintain our company's securities
in the CDS?The current practice will continue to remain.
3)Market Terminology
AllotmentThe allocation of new securities to an applicant for a
new issue.Annual General MeetingMandatory yearly meeting of a
company for the purposes of receiving the directors' report and
statement of accounts for the year, declaring a dividend, electing
directors and auditors and determining the auditors'
remuneration.Annual Report & AccountsA document to be forwarded
to shareholders by the directors of a company on an annual basis
which contains, amongst others, the annual audited accounts of the
company.ArbitrageBuying on one exchange and selling on another at
virtually the same moment to take advantage of a price variation in
a company's shares listed on the two exchanges.Articles of
AssociationThe documents of a company that govern the management
and administration of that company.Asset BackingA handy yardstick
for shareholders. It is the net assets of a company (assets less
liabilities) divided by the number of shares.At DiscretionAn
instruction given by a client to his broker, for the broker to buy
or sell a stock at his (the broker's) discretion.At LimitAn order
placed which sets a limit on either the lowest or highest price,
for which a share is bought or sold.At Market (also At Best)An
instruction to buy or sell at market price. Allows the
broker/dealer complete freedom of action. Should be treated with
caution and used only when a share must be sold.AuthorisedOrder
entry, modification, and cancellation are generally authorised for
the instrument.Authorised CapitalThe nominal amount of capital that
a limited company is permitted to raise under the capital clause in
its Memorandum of Association.AveragingBuying more of the same
shares, generally on a falling market, to lower the average cost
per share. (Can also average up, thereby raising the average cost
per share).Balance SheetA company's year-end statement of assets
and liabilities.Bear MarketA stock market in which sellers
dominate, resulting in generally falling prices.Blue ChipsThe
shares of a company known to make profits in good and bad times. As
there is a low risk of capital loss, the dividend and earnings
yield are proportionately low.BondA document recording a loan and
specifying the date of maturity and the rate of interest to be
paid.Bonus IssueDistribution of capital funds (usually from a
revaluation of assets or a share premium reserve) to shareholders
in the form of shares for which payment is not required.BourseA
French term for stock exchange, grain exchange or exchange dealing
in commodities.Broker (Stockbroker)An agent, authorised to buy and
sell shares on behalf of a client.BrokerageA fee charged for the
broker's services. Also called commission.Bull MarketA stock market
in which buyers dominate and where prices are on a rising
trend.
Buying-InBuying-in means the buying effected by the Exchange,
according to the rules of the Exchange, of securities which a
seller has failed to deliver on the day fixed for delivery.CallsAn
instalment called up by a company on contributing or partly paid
shares. A legal liability for shareholders of other than a "No
Liability" company.Capital Gain/ LossProfit/loss made on the sale
of a capital asset.Closing PriceThe price of a share or security at
the end of a day's stock market trading.Closing Session The closing
price will be the last know traded price Last opportunity to close
position at a fixed price In the event of no TCP during the period,
the closing price will be the last know traded priceClass of
SharesA document recording a loan and specifying the date of
maturity and the rate of interest to be paid.CommissionA fee
charged for the broker's services. Also called brokerage.Companies
Act 1965The Act of Parliament that governs companies.CompanyA
separate legal entity, incorporated under the Companies Act 1965,
carrying on a business or trade. A company may be private or
public, limited by shares or unlimited, or limited by
guarantee.Contract NoteDocument sent by brokers to clients of a
purchase or sale of shares. It confirms the transaction, giving
details of price, brokerage, stamp duty and clearing fee.Continuous
MatchingContinuous Matching is an order matching process according
to price, time, then priority, without human intervention. After
receiving buy or sell orders, Bursa Trade queues the orders and
arranges them according to a price-then-time priority. This means
orders are first grouped according to price, with the best price
taking precedence. Then, within each price group, orders are
arranged according to time. Continuous matching procedures only
operate during the regular trading sessions. Bursa Trade
continuously matches the first buy and sell orders in the queue,
and at the same time, confirms each executed transaction.CumA
prefix meaning "with". A share quoted "cum-dividend" means the
buyer is entitled to a dividend currently attaching to it,
similarly with cum-rights and cum-bonus.DebentureA fixed interest
security which has a maturity date and a specified rate of
interest. The assets of the borrowing company are charged against
the debenture issue; details of the charge are included in a
Debenture Deed drawn up to protect the debenture holder.Debt /
Equity RatioThe relationship between a company's borrowing and its
shareholders' capital funds.Direct BusinessIn relation to the KLSE,
any share transactions effected outside the Exchange, including:
crossing, that is transaction between two stockbroking companies;
or "married" transaction between two clients within a stockbroking
company.DiscountThe amount by which the price of a share is quoted
below its paid-up value.DissolutionThe winding up of a company by
way of compulsory liquidation or voluntary liquidation.Dividend
CoverThe number of items a company's annual dividend could be paid
out of current earnings.Dividend YieldThe amount of a company's
annual dividend expressed as a percentage of the current price of
the share of that company.Earnings Per ShareThe amount of a
company's annual profits or earning attributable to each ordinary
share of that company.EquityAnother name for the ordinary shares of
a company.ExPrefix meaning "without", the opposite to "cum". The
purchaser is not entitled to dividends, bonus shares or rights
previously attached to the share.Face ValueThe actual paid-up value
of a share. Seldom the same as the market value.FloatTerm given to
the commencement or listing of a new company on the stock
market.ForbiddenOrder, entry, modification and cancellation are
forbidden for the instrument Auto forbidden is activated when an
instrument expires at the end of a particular contract month.Gilt
EdgedA term usually associated with government or semi-government
securities, more generally used on British markets.Growth
StocksShares of companies with good prospects for increasing
profits and capital size. Likely to bring shareholders future
capital gains through a share price rise, high dividends, share
bonuses or rights issues.IndicesIn relation to a stock exchange,
calculations made on an index number basis to indicate the
movements in the general level of prices of securities listed on
that stock exchange.Initial Public Offering (IPO)An initial public
offering (IPO) occurs when a company first sells common shares to
investors in the public. Generally, the company offers primary
shares this way, although sometimes, secondary shares are also sold
as IPOs. For a company to offer IPOs, they need to hire a corporate
lawyer as well as an investment banker to underwrite the offer. The
actual sale of the shares is generally offered by the stock
exchange or by regulators. When the company starts to offer IPOs,
they are usually required to reveal financial information about the
company so that investors can make an informed decision.Insider
Trading/ DealingInsider trading or dealing is the purchase or sale
of a company's securities effected by or on behalf of a person with
knowledge of relevant but non-public material information regarding
that company. The insider is in a position to make massive gains by
selling or buying securities before information that might affect
the price of the company's securities (price-sensitive information)
is made public.Insider trading is an offence under the Companies
Act 1965 and the Securities Industry Act 1983.InstrumentA tradeble
asset or negotiable item such as a security, commodity, derivative
or index, or any item that underlies a derivative. An instrument is
a means by which something of value is transferred, held or
accomplished.Issued Share CapitalThe total number of shares issued
by a company.Limit OrderTo avoid buying or selling a stock at a
price higher or lower than what is wanted, it's best to place a
limit order rather than a market order. A limit order is an order
to buy or sell an instrument at a specific price. A buy limit order
can only be executed at the limit price or lower, and a sell limit
order can only be executed at the limit price or higher. When a
market order is placed, the price at which an order will be filled
can't be controlled. For example, if you want to buy a "hot" stock
that was initially offered at RM9, but don't want to end up paying
more than RM11.70 for the stock, you can place a limit order to buy
the stock at any price up to RM11.70. By entering a limit order
rather than a market order, you will not be caught buying the stock
at RM11.70 and then suffering immediate losses if the stock drops
later in the day or the weeks ahead. A limit order may never be
executed because the market price may quickly surpass the
investor's limit before the order can be filled. Using a limit
order also protects the investor from buying a stock at too high a
price. Some firms may charge more for executing a limit order than
a market order.LiquidationThe winding up of a company, which may
either be compulsory or voluntary.Liquidity of The MarketThe state
of affairs in a stock market in which it is generally easy to
convert securities into cash and vice versa, without causing a
movement in prices.Loan StockA security issued by a company in
respect of a loan made by investors.ManipulationsThe act of
transacting in the securities of a company that will have or is
likely to have the effect of raising or lowering or maintaining the
price of the company's securities on a stock market, with the
intention of inducing other persons to purchase or subscribe for
the company's securities. Such acts are illegal under the
Securities Industry Act 1983.Market CapitalizationThe total value
of a listed company's shares based on current market price.Market
OrderA market order is an order to buy or sell a stock at the
current market price. Unless otherwise specified, a broker will
enter an order as a market order. The advantage of a market order
is that it is almost always guaranteed that the order will be
executed (as long as there are willing buyers and sellers).
Depending on a firm's commission structure, a market order may also
be less expensive than a limit order.Marketable ParcelShares traded
on a stock exchange as set in multiples based on share price.Market
BidsA scale on which trading bids, through a stock exchange, are
based.Memorandum of AssociationThe document of a company that lays
down its name, registered office, objectives, share capital and the
liability of its members in the event of winding up.MergerIn
general terms, the amalgamation of two business enterprises into a
new entity.Negotiated CommissionThe amount of fee to be paid to a
stockbroker as agreed upon between client and stockbroker and not
subject to a scale stipulated by the stock exchange
concerned.Nominee CompanyA company formed by a stockbroking
company, bank or other institution for the purpose of holding
shares on behalf of the beneficial owners of the shares.Odd
LotsThis is an amount of shares that is smaller than the usual unit
of trading; specifically, a quantity of less than 100 shares of
stock in a transaction or a trade that is not divisible by 100.Odd
Lot MarketThe Odd Lot market refers to the trading of shares that
are less than 100 shares of stock Partial matching is allowed Order
are matched based on price time priority Price limit follow normal
marketOffer for SaleOne way in which the shares of a company are
offered to the public, normally through an issuing house.Official
ListIn respect of the Kuala Lumpur Stock Exchange, the list of all
securities which have been admitted for quotation in accordance
with the Exchange's Listing Requirements.OpenOrder entry,
modification, cancellation and order execution are allowed for the
instrument assuming the group state permits.Opening and Continuous
Trading Orders are matched real-time based on price-time priority
Opening price and quantity of orders matched are broadcast After
the Opening Auction, system automatically moves to continuous
trading phase Matched Trades can be continuously viewed from any
front-end system 5 best price limits are displayedOptionRight to
take up or sell shares at an agreed price at or before a specified
future date. Prefixed with terms of "call" or "put".Order BookOrder
Book is an 'electronic book' that shows the demand for the shares
of the company at various prices on a real time basis.Paid-Up
CapitalThe amount of a company's authorised capital which has been
subscribed by shareholders.Par ValueThe nominal price of a share,
loan stock or debenture.Pari PassuIn relation to a statement that
newly issued shares rank pari passu with all existing shares, such
newly issued share rank equally in every respect with all the other
shares of the same class previously issued.PortfolioA selection of
securities held by an investor.PremiumThe amount by which a share
is quoted above its paid-up value.Pre-Closing Starts immediately
after end of continuous trading phase Orders are accepted and
automatically updated in order book WITHOUT giving rise to trades
Theoretical Closing Price (TCP) based on orders entered, is
dynamically calculatedPre-Opening Enter, modify or delete orders No
order matching is done Theoretical Opening Price (TOP) based on
orders entered is dynamically calculated, and the last TOP
calculated before opening time is set as the natural opening price
Order in order book is broadcastedPrice DiscoveryThe process by
which price is determined by negotiation in a free market.
Basically, any asset purchased by an investor can be considered a
financial instrument. Stock and corporate bonds are equally
considered investing instruments as they can all be bought and sold
as things that hold and produce value. Instruments can be debt or
equity, representing a share of liability (a future repayment of
debt) or ownership.Price Earnings RatioThe relationship between the
price of a share and the earnings of the company attributable to
that share, the result being expressed as the current share price
divided by the latest available figure of earnings per
share.Private CompanyA company in which the number of its members
is restricted to 50.PrivatisationThe Government's exercise of the
transfer to private ownership companies or public enterprises owned
by the Government.ProspectusThe document to be issued by a company
intending to make an issue of shares to the public.ProxyOne who is
given written authority to vote for and on behalf of a shareholder
at a meeting of the company.ReceiverAn official appointed to wind
up the affairs of a company.RegistrarThe official or corporation
responsible for maintaining a company's share register.Registrar of
CompaniesThe public official appointed to administer the Companies
Act 1965 and the Securities Industry Act 1983.RemisierAn agent of a
stockbroking company who brings business to that company in return
for a share of the brokerage or commission.RenunciationThe action
of a shareholder in not taking up new shares attached as a right to
the share he currently holds by renouncing such a
right.ReservesOrder entry, modification, and cancellation are
permitted for the securities. The current trading status for the
securities is automatically changed to 'Reserved' when the
following occurs:Market order cannot be fully executed, potential
match price is outside static threshold during pre-opening, and
Market-on-Opening has no counterpart.RightsCompanies raise
additional capital by offering to existing shareholders the rights
to subscribe for new shares, at a price usually below the current
market price. These rights, while current, attract a price of their
own and can be traded on any stock exchange.ScoreThe acronym for
"System on Computerised Order Routing and Execution", the automated
trading system of the Kuala Lumpur Stock Exchange.ScripShare
certificate.SecuritiesThe generic term for any instrument traded on
a stock exchange.Securities Industry Act 1983The Act of Parliament
governing the business of dealing in securities, stock exchanges
and related matters in Malaysia.Securities CommissionEstablished by
the Ministry of Finance to streamline the activities relating to
equity and futures markets.Securities Commission Act