How to Buy Shares in Malaysia – Easy Guide To Get Started

Investing in stocks can be a useful method of making money. To be profitable and successful, you must understand the market and strategies, as well as the basic terminology of stocks. Stock investing is not for everyone. Therefore, it is important for you, as an investor, to master the correct investment fundamentals before starting to venture into the field of stock investment in Malaysia.

How to Invest in Stocks in Malaysia

In addition to understanding the market and strategies, you should be willing to take the time to research potential companies before trading.

Before that, there are four mandatory steps that you need to know.

1. Know Types of Shares and Types Of Stock Market Access

What Is a Share?

In short, shares are the holding of ownership of a company in the form of equity. Shares may be privately or publicly owned. Shares that can be owned by the public are companies listed on the Malaysian stock exchange, known as Bursa Malaysia.

Types of Shares

• Heavyweight Stocks (Blue Chips) – well established companies, usually very large cap, often dividend payers, and more stable than other segments
• Income Stock – pay dividends, creating a form of ‘income'
• Speculative Stock – have higher risk, with speculated higher rewards. This should not make up more than 5% of most regular portfolios
• Growth Stock – companies that have been showing high growth. Often do not pay dividends as reinvest profit back in to growing the business. Have a higher risk premium than blue chips or income stocks, and can have hits when there is less risk appetite in markets
• Seasonal Stocks (Cyclical Stock) – usually perform well during certain periods, having seasonal upsides and downsides, and predefined trends. Most of this behaviour is usually understood by market participants beforehand.
• Defensive Stock – these are companies that are generally stable, or seen as stable when there is less risk appetite in markets and investors are looking for a more safe place to put their capital. These are usually a lot more stable, and provide an avenue for lower risk seeking, longer term investors.

More Stock Market Access Types

• Stocks – This is the most popular investment in Bursa Malaysia. You can buy and own any company’s shares in various types of listed companies.
• Stock Warrants – A warrant is the right to buy shares of a company at a specific price at a particular time. For example, a Shariah-compliant company issues stock warrants to increase business capital. Warrants issued by this company are also Shariah-compliant.
  Only such a warrant has Shariah-compliant status. Meanwhile, warrants issued by any investment bank, also known as structured warrants, are instruments that are not Shariah-compliant because the rights cannot be converted into shares of the company.
• Exchange-Traded Fund (ETF) – ETF is just like a unit trust but is traded on Bursa Malaysia. In simple terms, ETFs are unit trusts that are traded like shares of public limited companies. You need to have a trading account for purchasing an ETF.
• Amanah Saham Bumiputera (ASB) – ASB was launched by Amanah Saham Nasional Berhad on 2 January 1990 to assist Malaysian citizens in providing alternative savings. ASB alternative savings can generate consistent returns or profits over a long period.
• Real Estate Investment Trust (REIT) – Real estate is a crucial asset class in an investment portfolio. Typically, before a REIT is introduced, investors invest in real estate or physical property stocks to gain exposure in the real estate sector.
  Investors now have the option to invest in a REIT by paying only a fraction of the real estate price. In other words, REITs provide a way to invest in quality large-scale commercial real estate without having to buy real estate directly. REITs typically offer a steady flow of revenue and attractive distribution results.

2. Acquire Knowledge on Shares, or Stocks

Before buying and selling stocks, you are advised to complete fundamental research and technical analysis to consider price movements. If you’re looking to make short term investments, you will need to emphasize on technical analysis.

There are two investment methodologies available in stock investing, which are fundamental and technical analysis.

Fundamental analysis is an analysis to study the background of a company using economic factors. Typically, this analysis can be obtained through the company's financial statements, news sources, and industry statistics. This type of analysis is suitable for investors who want to invest for the long term. Examples of fundamental analysis concepts are Return of Equity (ROE), Return on Asset, and discounted cash flow.

Technical analysis, on the other hand, is to study the movement of stock prices using charts. The source of this analysis is through charts and stock graphs only. Unlike fundamental analysis, technical analysis is suitable for short-term investments. Examples of technical concepts of analysis are trendline reversal pattern and overbought.

3. Prepare an Investment Portfolio

Investors use the investment portfolio for diversification and risk reduction. There are many types of portfolios recommended by experts in stock investing.

But, why the need for different types of stock investment portfolios? By compiling a diverse portfolio covering a wide range of sectors, you can become a more resilient investor. This means that if one industry is affected, the investment you make in another industry will not be affected.

When creating a portfolio, you should think about the type of investor, or portfolio you want to have, or be.

There are three distinct types of investors. There are pre-investors, passive investors, and active investors. To know which kind of investor you are and which kind you should be, there is one thing you need to consider: your risk appetite.

Risk-profile is crucial for you to determine your tolerance to risk, investing timeframe, and investment knowledge.

Pre-Investor

A pre-investor is simply put as someone who isn't investing. Individuals with minimal financial awareness characterize pre-investors. Thus if you have not planned any of your savings or salary to be financed, you may likely want to start slow. Learn more about investment and begin by being a passive investor first. This is to ensure that you know how to manage your capital correctly and how to mitigate the loss.

Passive Investor

Most investors will grow from being a pre-investor to a passive investor. It's the most common starting point on the road to financial security. A passive investment strategy is suitable for people with busy lives, families, jobs, outside interests, or entrepreneurs building businesses. As a passive investor, this is where brokers or online stock trading platforms in Malaysia come in handy.

Active Investor

An active investor is an individual who actively participates in the process of investing. In simple terms, the aggressive investment strategy will require you to spend more time and more effort on the process to be compared with the other types of investors. Thus, this type of investment strategy is suitable for people who can monitor their trades daily. It is also for people who have a high level of knowledge and confidence when it comes to investing.

4. Learn Two Types of Stock Gains

In stock investing, there are two types of profits. The first type is Capital Gain, where investors buy at low prices and sell at high prices. The second type of profit is dividend profit.

Alternatively, companies will give dividends if they make a profit. Thus, if you are looking to receive dividend income, you need to understand that the company’s performance determines it.

Therefore, you must check the companies you want to invest in and make sure the company is suitable for your portfolio.

Before buying and selling a company's stock, you should thoroughly analyze the intended business. Review public information such as income reports, SEC reports, and the company's financial filings.

Besides, you can also check if the company you choose is listed on the list of troubled companies. A public company on Bursa Malaysia with PN17 or GN3 status is a financially distressed company.

The full list of troubled companies can be found on the Bursa Malaysia website.

5. Provide Capital Money

Now that you know the types of stocks available in Malaysia, the next step is to prepare your investment capital. In an investment, you need to know that the loss is definite, and the profit is uncertain, especially for relatively risky types of stock investing. You can take extra caution with your portfolio, and when deciding how much to invest, try to make sure this is something you do not need in the near future as usually this is best as long term strategy.

Therefore, you are encouraged to provide capital money and learn how to manage capital well. Remember not to invest your entire wealth into a company to reduce risk through diversification.

6. Open a CDS and Trading Account

Alternatively, now that you know how to buy shares in Malaysia, the next step is to open a CDS and Trading Account.

CDS stands for Central Depository System. Just like savings accounts that keep your cash, CDS accounts are accounts that keep your shareholdings. Whenever you buy shares in a public listed company, the shares will be transferred and held in your CDS accounts.

On the other hand, for trading accounts, you should open an account with a stockbroker or participating organization registered with Bursa Malaysia. You can find the list of stockbroker companies on Bursa Malaysia website.

Should You Invest in Malaysian Stock Market?

As a new investor, you must determine which stock to invest in and whether the stock market you choose is suitable for your investment journey. As it is strategically located in the heart of Southeast Asia, Malaysia is a cost-competitive location to set up offshore operations for the manufacture of advanced technological products for regional and international markets. Thus making this country a hub for development with many well-established companies. Below are the advantages of investing in the Malaysia stock market for you to dwell in.

Advantages of investing in KLSE

1. Conducive Business Environment

Malaysia offers investors a dynamic and vibrant business environment with the ideal prerequisites for growth and profits. A politically stable country with a well-developed legal system, Malaysia also provides attractive incentives for investors.

2. Technology Advancement

With the help of technology, Malaysia is steadfast in providing for the requirements for investor companies based in the country. Malaysia is also one of the most technologically developed countries amongst industrializing nations in the ASEAN region.

3. Full-Fledged Infrastructure

Infrastructure in Malaysia is designed to serve the business community, and it is one of the best in Asia. Telecommunications network served by digital and fiber optic technology, five international airports, well-maintained highways, and seven international seaports makes Malaysia an ideal springboard to the Asia-Pacific market.

Conclusion

In general, there are many resources available to help you invest in a stock. These include educational resources on individual and third party broker websites, market analysis, online and live courses, and workshops, and stock simulator accounts.

As discussed above, you need to learn how to invest the right stocks before starting to invest. No investment is one hundred percent free from the risk of loss. Therefore, you need to be rational and find resources and companies that have a good business foundation.

It should also be noted that, when making a trading plan, you should consider several essential factors so that your individual needs are met, and investment goals can be achieved over time:

• Tolerance to risk
• Preferred investment period
• Individual tax conditions
• Long-term objectives for investment

By following the steps above and taking the time to learn the terms and understand the market before making a substantial investment, you should be able to generate finance through stock investing.

The key is to take the time to learn how to buy shares in Malaysia and start with a small investment to reduce risk. In addition, investors should continue to seek more guidance and expert advice to improve their strategies.

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