If you’re Malaysian and new to investing, you’re probably wondering how to buy shares in Malaysia and open a Malaysian brokerage account. Or you could be a foreigner who wants to invest directly through a Malaysian brokerage and you’re thinking about which one to go with.
In either case, it’s important to pick a brokerage that suits your individual needs and preferences. As a value investor and Malaysian myself, here are six things to consider when choosing a Malaysian brokerage account.
6 things to consider when opening a brokerage account in Malaysia
1. CDS vs. nominee account
Let me explain the difference between a CDS account and a nominee account:
Before you open a brokerage account with a Malaysian broker, you first need to open a Central Depository System (CDS) account. A brokerage account allows you to trade shares through your broker. A CDS account records the ownership of Malaysian securities (i.e. stocks listed on Bursa Malaysia).
For example, you could have a brokerage account with both Maybank and CIMB, and you buy Stock A through Maybank and Stock B through CIMB. Even though you buy two different stocks via two different brokerages, you are listed as the direct owner of both stocks in your individual CDS account. As the direct owner, you enjoy certain rights as a shareholder which includes voting rights and the right to attend AGMs/EGMs.
For trust (nominee) accounts, Malaysian brokerages will use them to buy shares on your behalf. For example, as a Malaysian, I can buy Singapore Exchange (SGX) shares through my Malaysian brokerage who will then place those shares in a nominee account assigned to me. As I don’t have a CDP account in Singapore (equivalent to the CDS account in Malaysia), I am not the direct owner of the shares in Singapore. In this case, I don’t get to vote or have the right to attend AGMs/EGMs for my Singapore stocks. But I’ll still continue to enjoy basic rights as a shareholder like receiving dividends and the option to subscribe to rights issue.
Foreigners are allowed to open a CDS account provided that you have a bank account in Malaysia. Sometimes, it may be tedious for foreigners to open a bank account. In that case, a nominee account is probably more convenient. Some brokerage firms charge nominee account holders additional fees for handling dividends and so on. It is best to sort them out before you decide to open one.
You can also read more about the pros and cons between using a CDP and nominee account.
2. Market access
This is important to me as I invest both Bursa Malaysia (local) and SGX (foreign) shares. As such, I need a brokerage with the facilities to execute transactions for both local and foreign shares. Besides Singapore, I may also be interested in stocks listed in Thailand, Hong Kong, Australia, Canada, and the United States. However, if you are only into local Malaysian stocks, then a brokerage which simply serves the local market will suffice.
If you are interested to trade foreign shares, you can also refer to these brokers based in Singapore as they offer more competitive rates in general. In this case, a nominee account will usually be opened if you’re not a Singaporean citizen or resident. In addition to brokerage and custodian fees, you may also want to take note of the charges incurred by corresponding or intermediary banks every time you transfer money to your nominee account as the fees can sometimes be hefty. For example, based on my personal experience, S$20 and S$60 will be deducted each time you transfer money to FSMOne and Saxo Markets nominee accounts via telegraphic transfer respectively.
3. Types of investment products
In general, all brokerage firms in Malaysia are more or less similar in their service offerings. You are able to trade ordinary shares, preference shares, warrants, exchange traded funds (ETFs), exchange traded bonds and sukuk (ETBS), business trusts, stapled securities, and real estate investment trusts (REITs) listed on Bursa Malaysia. (Here’s a list of teh top Malaysian REITs that made money if you invested from their IPOs.)
As for commodity, equity, and financial derivatives trading including futures and options, these activities are managed under Bursa Malaysia Derivatives which is presently owned by Bursa Malaysia.
4. Role of a stockbroker
Personally, I’m a value investor who buys and accumulates good stocks at cheap prices over the long term. Why is this important when choosing a stockbroker? Because I believe it is important to set your personal investment goals and objectives before settling on a stockbroker.
To me, the role of a stockbroker is to help me complete the execution of my trades. It is not to provide me with stock tips, recommendations to buy/hold/sell any stock at any time. This is important because we must understand that the interests of your stockbroker may be different from yours. Ultimately, you want a stockbroker that follows your investment objective. If he understands that you’re a medium/long-term investor, he shouldn’t be calling you to offer with hot tips which do not help your investment objectives.
5. Offline/online access
To me, I prefer online access over offline. It’s easy, convenient, and a lot cheaper. These days, trading platforms are designed in such a way that it is easy for you to trade stocks even if you are not an IT-savvy person. It is harder for you to make a mistake.
With that said, if you are unsure about any features on your brokerage’s trading platform, you can always call or WhatsApp your stockbroker for help. Thus, the key is to find a helpful stockbroker or trading representative. I also prefer if a brokerage firm has an office nearby, so it is convenient for me you make a trip down if ever require.
6. Brokerage fees
Below is a list of Malaysian brokerage firms and their minimum transactions fees for trading Bursa Malaysia shares based on cash trading (non-margin). The trading limit of these cash accounts depends on the amount of cash you deposit in your brokerage account. They usually have lower brokerage charges than margin accounts. Generally, using margin financing is a double-edged sword and a risky tool that amplifies both earnings and losses.
|BROKERAGE||UP TO RM100K||ABOVE RM100K||MINIMUM FEES|
|Affin Hwang Investment Bank||0.70%||0.50%||RM28|
|Alliance Investment Bank||0.42%||0.21%||RM12|
|Hong Leong Investment Bank||0.106%||0.106%||RM8.48|
|JF Apex Securities||0.60%||0.30%||RM28|
|Kenanga Investment Bank||0.60%||0.30%||RM28|
|Malacca Securities||0.08% (Up to RM50,000)||0.05% (>RM50,000)||RM8|
|Rakuten Trade||0.10%||Flat RM100||RM7|
|RHB Banking Group||0.42%||0.21%||RM28|
|UOB Kay Hian Securities||0.42%||0.21%||RM28|
Fees shown are for Bursa Malayisa stocks only. Fees may vary for foreign-listed stocks and foreign currency-denominated stocks. Updated as of 25 March 2021.
At the moment, Rakuten Trade does not offer facilities to trade foreign shares.
What’s the next step?
The next step is to choose a brokerage firm, have the necessary documents prepared, head down to their office, and have a representative help you open a CDS account (if you don’t already have one) and a new brokerage account. They will help complete the entire process for you. Or you could go for a fully online broker to register everything in the comfort of your home.
Alternatively, you can also open a CDS account through the official Bursa Anywhere mobile app. The app also provides additional features for you to manage your CDS account like viewing your Malaysian portfolio and managing your dividend payments.
Hopefully, I have given you some clear directions on how to buy shares in Malaysia and open a Malaysian brokerage account. If you have any questions I could help with, simply ask in the comments below and I’ll be glad to share what I know.
Happy investing! 🙂