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.
You must learn the discipline to enter and exit the market on entry and exit signals.
Scenario 1
John 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 2
May 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 3
Aminah 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
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.
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 from
ALLIANCE INVESTMENT
BANK BHD
076-004
087-021
BHD
078-007
Year's High
Year's Low
Stock Code
Stock Counter
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 Traded
stocks 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 High
Day's Low
Div Yield
P/E
Ratio(Price/Earning
s 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:
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
this indicates the value of assets backing the stock of a company; calculated by:
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 Indices
A 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 Indices
Stock 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 Indices
The 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 FTSE
The FTSE Bursa Malaysia Index Series
Bursa 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.
Investable
All 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.
Tradable
All stocks are liquidity screened to ensure stock availability and ease of trading.
iii.
Transparent
A clear and predictable set of Ground Rules provides transparency and enables easy
understanding and anticipation of the management of the index series.
Free Float
Each 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.
Liquidity
A 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.
Trading
Month
Contract
Type
Contract
Month
Underlying Index
b May 2009
Trading
Month
Contract
Type
Contract
Month
Underlying Index
c Jun 2009
d Jul 2009
Spot Month
Next Month
1st Quarter
2nd Quarter
i.
Jul 2009
Aug 2009
Sep 2009
Dec 2009
ii.
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 KLCI
1. 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 Milestones
The 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
1986
The 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
1990
29 May
1992
18 Apr
1995
Number 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
1998
25 May
2005
6 Jul
2009
Now known as FTSE Bursa Malaysia KLCI and adopts the FTSE Bursa Malaysia Index
calculation methodology
9 Jun
2011
Enchancement to the liquidity screening rule to further align the index to global standards.
Overview
Bursa 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 Price
It'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:
Your telephone company may be able to send you market updates via your mobile
phone
It is best to explore your options and find services that best suit you.
Types Of Stocks
What types of stocks are there?
Ordinary Stocks
When 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 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.
Warrants
Warrants, 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.
One 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 Orders
You 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 Orders
The 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.
Trading 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 Level
I am not very comfortable with risk and will invest in fixed interest/capital guaranteed securities
(government bonds, bank term deposits).
Medium Risk Level
I can take on a moderate amount of risk (blue chip Industrial and Banking and Finance sector
shares).
High Risk Level
I am comfortable with risk. I am seeking a high return and prepared to evaluate companies early
in their growth phase (recently listed resource companies).
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.
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.
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.
When to buy
When to sell
The Structure of Your Trading Plan
A 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
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 a corporate 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.
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.
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.
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.
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
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.
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?
Transfers
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 userfriendly 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.
ii.
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. Parents
b. Children/Adopted children
c. Spouse
d. Brothers
e. Sisters
f.
Grandparents
g. Grandchildren
Individual 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.
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.
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
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.
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.
Bursa Malaysia Depository is continuously striving to enhance the security of your CDS
account. Designating relevant accounts as inactive will restrict unauthorised transactions.
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.
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'.
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 back
b. To facilitate conversion of debt securities
c. To facilitate company restructuring processes
d. To facilitate rectification of errors
e. When a corporate body is removed from the official list of a stock exchange
f.
In any other circumstances determined by the Central Depository from time to time, after
consultation with the Securities Commission
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 Berhad
b. Ambank (M) Berhad
c. CIMB Bank Berhad
d. HSBC Bank Malaysia Berhad
e. Malayan Banking Berhad
f.
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 Order
b. Executor/Administrator appointed pursuant to Grant of Representation
ii.
iii.
iv.
The 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.
ii.
iii.
Will the delisted securities in my CDS account still be reflected in the CDS statement of
account?
Yes, it will.
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.
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.
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
Allotment
The allocation of new securities to an applicant for a new issue.
Annual General Meeting
Mandatory 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 & Accounts
A 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.
Arbitrage
Buying 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 Association
The documents of a company that govern the management and administration of that
company.
Asset Backing
A handy yardstick for shareholders. It is the net assets of a company (assets less
liabilities) divided by the number of shares.
At Discretion
An instruction given by a client to his broker, for the broker to buy or sell a stock at his
(the broker's) discretion.
At Limit
An 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.
Authorised
Order entry, modification, and cancellation are generally authorised for the instrument.
Authorised Capital
The nominal amount of capital that a limited company is permitted to raise under the
capital clause in its Memorandum of Association.
Averaging
Buying 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 Sheet
A company's year-end statement of assets and liabilities.
Bear Market
A stock market in which sellers dominate, resulting in generally falling prices.
Blue Chips
The 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.
Bond
A document recording a loan and specifying the date of maturity and the rate of interest
to be paid.
Bonus Issue
Distribution 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.
Bourse
A 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.
Brokerage
A fee charged for the broker's services. Also called commission.
Bull Market
A stock market in which buyers dominate and where prices are on a rising trend.
Buying-In
Buying-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.
Calls
An 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/ Loss
Profit/loss made on the sale of a capital asset.
Closing Price
The price of a share or security at the end of a day's stock market trading.
Closing Session
In the event of no TCP during the period, the closing price will be the last know traded
price
Class of Shares
A document recording a loan and specifying the date of maturity and the rate of interest
to be paid.
Commission
A fee charged for the broker's services. Also called brokerage.
Companies Act 1965
The Act of Parliament that governs companies.
Company
A 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 Note
Document 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 Matching
Continuous 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.
Cum
A 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.
Debenture
A 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 Ratio
The relationship between a company's borrowing and its shareholders' capital funds.
Direct Business
In relation to the KLSE, any share transactions effected outside the Exchange, including:
Discount
The amount by which the price of a share is quoted below its paid-up value.
Dissolution
The winding up of a company by way of compulsory liquidation or voluntary liquidation.
Dividend Cover
The number of items a company's annual dividend could be paid out of current earnings.
Dividend Yield
The amount of a company's annual dividend expressed as a percentage of the current
price of the share of that company.
Earnings Per Share
The amount of a company's annual profits or earning attributable to each ordinary share
of that company.
Equity
Another name for the ordinary shares of a company.
Ex
Prefix meaning "without", the opposite to "cum". The purchaser is not entitled to
dividends, bonus shares or rights previously attached to the share.
Face Value
The actual paid-up value of a share. Seldom the same as the market value.
Float
Term given to the commencement or listing of a new company on the stock market.
Forbidden
Order, 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 Edged
A term usually associated with government or semi-government securities, more
generally used on British markets.
Growth Stocks
Shares 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.
Indices
In 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/ Dealing
Insider 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.
Instrument
A 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 Parcel
Shares traded on a stock exchange as set in multiples based on share price.
Market Bids
A scale on which trading bids, through a stock exchange, are based.
Memorandum of Association
The 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.
Merger
In general terms, the amalgamation of two business enterprises into a new entity.
Negotiated Commission
The 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 Company
A 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 Lots
This 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 Market
The 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 market
Offer for Sale
One way in which the shares of a company are offered to the public, normally through an
issuing house.
Official List
In 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.
Open
Order entry, modification, cancellation and order execution are allowed for the
instrument assuming the group state permits.
Opening and Continuous Trading
After the Opening Auction, system automatically moves to continuous trading phase
Option
Right 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 Book
Order 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 Capital
The amount of a company's authorised capital which has been subscribed by
shareholders.
Par Value
The nominal price of a share, loan stock or debenture.
Pari Passu
In 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.
Portfolio
A selection of securities held by an investor.
Premium
The amount by which a share is quoted above its paid-up value.
Pre-Closing
Orders are accepted and automatically updated in order book WITHOUT giving rise to
trades
Pre-Opening
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
Price Discovery
The 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 Ratio
The 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 Company
A company in which the number of its members is restricted to 50.
Privatisation
The Government's exercise of the transfer to private ownership companies or public
enterprises owned by the Government.
Prospectus
The document to be issued by a company intending to make an issue of shares to the
public.
Proxy
One who is given written authority to vote for and on behalf of a shareholder at a
meeting of the company.
Receiver
An official appointed to wind up the affairs of a company.
Registrar
The official or corporation responsible for maintaining a company's share register.
Registrar of Companies
The public official appointed to administer the Companies Act 1965 and the Securities
Industry Act 1983.
Remisier
An agent of a stockbroking company who brings business to that company in return for a
share of the brokerage or commission.
Renunciation
The 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.
Reserves
Order 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.
Rights
Companies 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.
Score
The acronym for "System on Computerised Order Routing and Execution", the
automated trading system of the Kuala Lumpur Stock Exchange.
Scrip
Share certificate.
Securities
The generic term for any instrument traded on a stock exchange.
One who applies for a new security with the intention of selling it at the first available
opportunity.
Stockbroker
An agent who buys and sells shares on behalf of his clients and is paid brokerage or
commission for his services.
Stock Exchange
An organisation providing the market-place or facility for the buying and selling of stocks
and shares.
Trading At Last (TAL)
Orders at TAL will only be entered and matched at the Closing Price. Only Limit orders
are allowed and the system will reject any Market Orders.
Theoretical Closing Price (TCP)
Price at which an instrument would trade if it stops trading at the moment the price is
calculated. TOP is calculated on a real-time basis in Pre-Closing/Closing Phase.
Theoretical Opening Price (TOP)
Price at which an instrument would trade if it opens at the moment the price is
calculated. TOP is calculated on a real-time basis in Pre-Opening Phase.
Trustee Security
A security which meets the requirements of legislation relating to the use of funds by
trustees.
Underwriter
An organisation, normally a merchant bank or a broking firm, that guarantees a minimum
level of subscription to a share or debt issue. If public subscriptions fail to reach the
minimum level, the underwriter takes up the shortfall. Underwriters often have subunderwriters to share the risk.
Unsecured Note
A fixed interest security with a maturity date and specified rate of interest.
Unlike a debenture, it is not secured by a charge over the issuing company's assets.
Unsecured note holders rank ahead of shareholders in the event of the company's
liquidation.
Winding Up
The voluntary or compulsory liquidation of a company.
The interest amount the ETBS holder will receive above the principal amount. It is
generally expressed as a percentage of the principal value.
Coupon Frequency
The frequency with which coupon payments are made to ETBS holders.
E
ETBS Holder
The owner of a bond or sukuk asset.
G
Guarantor
The government, commercial or holding company that will act as a guarantor for the
ETBS issuer in case of a default.
I
Issuer
A company or government organisation that issues bonds/sukuk to investors in order to
raise funds for its operations, expansion or other needs.
M
Maturity Date
The date when the ETBS issuer pays the principal amount to the holder. It is also known
as redemption date.
P
Principal
The amount borrowed by the issuer or the amount lent by investors. Typically, this is the
value returned to the ETBS holder upon maturity. It is also known as nominal value, par
value, redemption value or maturity value of a bond.
T
Trustee
A financial organisation that has been given fiduciary powers to ensure obligation of the
bond contract is met between the ETBS issuer and the ETBS holder. They act in the
interest of the ETBS holder.
Abbreviations
ADA
Authorized Depository Agent
ADM
Authorised Direct Members
AGM
Annual General Meeting
ASB
Amanah Saham Bumiputera
ASN
Amanah Saham Nasional
AWAS
Advanced Warning and Surveilance System
BLR
Base Lending Rate
BNM
Bank Negara Malaysia
BSE
Bumiputera Stock Exchange
CADI
Cumulative Advance / Decline Indicator
CARDS
Certificates for Amortizing Revolving Debts
CDS
Central Depository System
CIC
Capital Issue Committee
CLOB
Central Limit Order Book
EAFE INDEX
The Europe, Australasia & Far East Index
ECOS
Electronic Client Ordering System
EDMS
Electronic Documents Management System
EPF
Employees Provident Fund
EPS
Earning Per Share
ESOS
Employees Share Option Scheme
FDSS
Fixed Delivery and Settlement System
FIC
Foreign Investment Committee
GDP
Gross Domestic Product
GNP
Gross National Product
IBFF
Inter-Broker Fidelity Fund
IBS
Islamic Brokerage System
ICULS
Irredeemable Convertible Unsecured Loan Stock
ICUN
Irredeemable Convertible Unsecured Notes
IPC
Infrastructure Project Companies
IPO
Initial Public Offering
IPP
Independent Power Producer
ISIN
International Securities Identification Number
ISO
International Standard Organisation
ITC
Investment Tax Credit
KLCCH
Kuala Lumpur Commodities Clearing House
KLCE
Kuala Lumpur Commodity Exchange
KLIBOR
Kuala Lumpur Interbank Offered Rate
KLOFFE
Kuala Lumpur Options and Financial Futures Exchange
KLSE
Kuala Lumpur Stock Exchange
KLSE CI
KLSE Composite Index
Labuan IOFC
Labuan International Offshore Financial Centre
LIBID
London Interbank Bid Rate
LIBOR
London Interbank Offered Rate
LIFFE
London International Financial Futures Exchange
LO
Licensing Officer
LOSR
Location of Share Registrars
LSE
London Stock Exchange
M&A
Memorandum & Articles of Association
MARC
Malaysian Rating Corporation Berhad
MBO
Management Buy Out
MCD
Malaysian Central Depository
MESDAQ
Malaysian Exchange of Securities Dealing and Automated Quotations
MGS
Malaysian Government Securities
MIDF
Malaysian Industrial Development Finance
MIDFCCS
MIDF Consultancy and Corporate Services Sdn Bhd
MIER
Malaysian Institute of Economic Research
MIH
Malaysian Issuing House
MLR
Minimum Lending Rate
MME
Malaysia Monetary Exchange
MTDC
Malaysian Technology Development Corporation
NASDAQ
National Association of Securities Dealers Automatic Quotation
NOI
Net Operating Income
NYSE
New York Stock Exchange
OTC
Over The Counter
PDS
Private Debt Services
RAM
Rating Agency of Malaysia
RIIAM
Research Institute of Investment Analysis Malaysia
ROC
Registrar of Companies
RULS
Redeemable Unsecured Loan Stock
SBL
Securities Borrowing and Lending
SC
Securities Commission
SCANS
Securities Clearing Automated Network Services
SCORE
System on Computerised Order Routing and Execution
SDR
Special Drawing Rights
SIA
Securities Industry Act
SMI
Small and Medium Industry
SRR
Statutory Reserve Requirement
TSR