For those keen on trading, whether it be something as basic as how to buy shares to a more overarching financial plan like what is considered good investment in Malaysia, a bit of history and background would help.   

Malaysia’s financial system is made up of both conventional and Islamic financial systems which means it is partially regulated by legal and Shariah governance guidelines. So, what does this mean for an investor wanting to get started on trading in Malaysia?

Similarly, for traders in Malaysia, conventional and Islamic financial instruments .i.e., bonds and equities are traded in the country. Bonds and equities from both markets respond to the same market factors: supply and demand, volatility and etc. In the past few years, conventional and Islamic banks have been shown to react similarly to economic and financial crises and their aftermath, reflecting increasing overlaps between Islamic and conventional financial practices.     

Having said this, Malaysia’s Islamic finance industry is the third largest in the world and considered one of the most advanced Islamic banking markets globally. Malaysia’s dual financial system has Islamic and conventional financial markets co-existing based on mostly the same infrastructure. Furthermore, with most Islamic finance consumers being non-Muslims and its Islamic banking sector liberalised, trading in Malaysia is beneficial for investment albeit a localised regulatory and supervisory framework reflective of the country’s mixed economic system.

The Malaysian capital market is regulated and developed by the Securities Commission Malaysia (SC), the statutory body that also supervises its market institutions. The stock exchange of Malaysia known as Bursa Malaysia is its largest stock market. In Asean, it is one of the most active exchanges. For anyone interested in learning more about how to start trading in Malaysia, getting familiar with the largest stock market in the country would serve well as a crash course of sorts to trading in Malaysia.

Trading Procedures: Guidelines from Bursa Malaysia

To safeguard fair, secure trading grounds and conducts, Bursa Malaysia exercises close supervision and regulation. The two broker categories that fall under their supervision and regulation are stock brokers and futures brokers.

For trading in Bursa Malaysia, the steps are as follows:

1. Open a Trading Account and Remisier Introduction
   New traders are required to open 2 accounts: Trading Account and Central Depository System (CDS) Account with a Participating Organisation .i.e., stock broker. Following which the trader will be introduced to a remisier or licensed dealer.
   
2. Order Instructions to Remisier
   The trader should place an order to their remisier, instructing number of shares to be purchased from which company at a set price. After which, the trader will provide their CDS account number for order entry.
   
3. Order Placement
   Order(s) will be entered into the Participating Organisation’s (PO) Automated Trading System (ATS) and/or internet trading system, and then sent to Bursa’s Malaysia trading engine. Following which, the order confirmation will be routed back to the PO, and the trader’s internet trading system, if applicable.
   
4. Price Matching
   The system will now automatically match the order with prices. Price matching is done through a bid and offer process, based on market supply and demand. The way an order is transacted is by selling a security to the highest bidder and buying the security at the lowest offer. Therefore:
   • Buy Order – Transaction price equals keyed in price or less if seller’s price is below buyer’s price.
   • Sale Transaction – Transaction price equals keyed in prices or more if buyer’s order is higher.
     
5. Trade Confirmation
   After order and price are matched, a trade confirmation will be printed showing original order number, stock number, price, and quantity (unit of shares) matched and the counter-party PO.
   
   The remisier is required to double confirm with the trader that a specified unit of shares has been bought/sold at a certain price. Bought and sold order slips are differently coloured to avoid confusion.
   
6. Receipt of Contract
   Contract notes will be sent by the broking house to the trader stating details of transaction: brokerage, stamp duty, cost of purchase or proceeds of the sale and payable clearing fees.
   
7. Delivery and Settlement (T + 2)
   All normal transactions will be delivered and settled 2 days after the transaction date (T), hence T + 2. CDS shares uses a book entry system to keep track of shares’ movements of Bursa Malaysia trades.
   
   If a trader buys share X, the share will be credited to the trader’s CDS account and the seller’s account will record a debit of share X. For settlement, sellers must have the sufficient number of shares in their CDS account.  

Ways to Start Investing in Malaysia

Bursa Malaysia allows diverse Islamic and conventional financial instruments for trading: bonds, equities, derivatives, investment funds, stocks, futures and more. Aside from trading with Bursa Malaysia, individual investors may also trade independently albeit being subject to SC regulations.

Online Trading

ZFX is an example of such a financial institution specialising in multi-asset trading. Their ZFX MT4 trading platform for Windows, Mac, and the mobile app version supports trading of multiple asset types, one-click trading, trading from charts, automated trading with Expert Advisor (EA), and can be integrated with a trader’s trading system.

Such brokerages have made online trading more accessible to beginner traders. Trading bonds, options, stock, forex, and other assets are now possible with the creation of an online account.

• Pros of Online Trading
  
  1. Economical – Compared to traditional trading, trader’s pay less on brokerage fees and other fees. ZFX and other brokerages like it provide minimal to zero brokerage plans.
  2. Real-Time Trading – Online trading platforms make it possible for an investor to trade independently and fast. These platforms provide features that give access to asset prices and place an order on the spot without the need to engage a broker.
  3. Instant Market Access – The ZFX MT4 online trading platform also comes with technical analysis tools, charts, and market insights and real-time news to traders. This provides even a beginner trader with the required knowledge to make informed trading decisions.
  4. Transparency – Premiums, brokerage fees, taxes, administration costs and so on are stated. These can facilitate a trader in placing orders and calculating their funds on each transaction.
  5. All-Access – The ability to access funds and trade positions at any hour helps a trader in monitoring their trade in a timely and efficient manner.
     
• Cons of Online Trading
  
  1. Over-Spending – With a trading platform and tools right at your fingertips, it’s easy to see how a trader could spend beyond their means on trading.
  2. Lack of Guidance – Trading independently can be a beginner trader’s ideal setup but without guidance from a broker, there’s more room for error. Seasoned traders see the value in experience and research. Although it is possible to learn while you trade, a trader might find it easier to go with a broker in the initial stage of their trading journey.
  3. Internet-Reliant – This may seem petty but for short-term traders like scalpers and swing traders, time is of the essence. A trivial matter like the loss of internet connection could cause a major upset to one trading day.
  4. Trading in Excess – More than ease of use of online trading platforms, a trader could be inclined to trade excessively when it comes to online trading. With more accessibility to the market, and the convenience as well, it could be harder to stay disciplined with your funds with online trading.   

Buy Shares and Stock Investment in Malaysia

With the country’s robust trading environment and economy, it’s no wonder that stock investment in Malaysia is one of the more popular investments of choice for Malaysians. Furthermore, having Bursa Malaysia as one of the largest bourses in Asean with a listing of 900 companies, Malaysian investors can look forward to optimistic prospects for trading stocks.

To begin investing in shares, there are a few things for an investor to factor in. Below are the basics to buying shares.

• Types of Shares
  
  When an investor buys shares, they are essentially buying a small piece of ownership to a company. This share comes in the form of an equity. Company ownership comes in two forms: privately and publicly owned. Those that can be publicly owned are companies that are publicly listed on the Malaysian Stock Exchange, otherwise known as Bursa Malaysia. The types of shares available to trade:
  • Income Stock
  • Growth Stock
  • Blue Chip
  • Speculative Stock
  • Defensive Stock
  • Seasonal Stock
    
• Knowledge Acquirement
  
  No matter the length of time a trader has planned for their trading journey, trading necessitates solid knowledge prior to taking part. Aside from learning while trading and seeking advice from other traders or brokers, there are many tools and infrastructure for bolstering an investor’s trading apprenticeship.
  
  The many online trading platforms out there provide technical and fundamental analysis tools and personal training or knowledge database. All of these can educate a new trader and support them should they choose to self-educate.
  
• Portfolio Diversification
  
  Upon acquiring enough knowledge, a trader should consider diversifying their portfolio. An investor contemplating on becoming a long-term trader would find a diversified portfolio beneficial in managing or reducing risk to their investment.

At a Glance: Opening a Brokerage Account

• Account Type
  
  Before embarking on a trading journey, the trader first needs to know if they would like to go with a Direct Central Depository System (CDS) or Nominee Account. The former is operated by Bursa Malaysia while the latter means the assets that you trade will be handled by the bank of your choice or stock brokerage platform).
  
  Some of the differences between the two accounts:
  
  

• Stock Brokerage Fees in Malaysia
  
  Brokerage fees in Malaysia differ from platform to platform. Below is a comparison on some of the stock brokerage platforms in Malaysia.

Things to Consider

For anyone interested in growing their investment, trading is worth considering, especially when it comes to trading financial instruments like gold. Such instruments are most suited for long-term investment and so it goes with trading.

If trader profiles were anything to go by, the Values Driven Trader finds success in using a value investing approach. It’s also a trading strategy not to be taken lightly with Warren Buffet as one of its proponents.  

FAQs

1. How to do trading for beginners in Malaysia?
   • Open a Trading Account and Remisier Introduction
     New traders are required to open 2 accounts: Trading Account and Central Depository System (CDS) Account with a Participating Organisation .i.e., stock broker. Following which the trader will be introduced to a remisier or licensed dealer.
   • Order Instructions to Remisier
     The trader should place an order to their remisier, instructing number of shares to be purchased from which company at a set price. After which, the trader will provide their CDS account number for order entry.
   • Order Placement
     Order(s) will be entered into the Participating Organisation’s (PO) Automated Trading System (ATS) and/or internet trading system, and then sent to Bursa’s Malaysia trading engine. Following which, the order confirmation will be routed back to the PO, and the trader’s internet trading system, if applicable.
     
2. How can I become a trader in Malaysia?
   Before embarking on a trading journey, the trader first needs to know if they would like to go with a Direct Central Depository System (CDS) or Nominee Account. The former is operated by Bursa Malaysia while the latter means the assets that you trade will be handled by the bank of your choice or stock brokerage platform).
   
3. Is trading legal or illegal in Malaysia?
   In the past few years, conventional and Islamic banks have been shown to react similarly to economic and financial crises and their aftermath, reflecting increasing overlaps between Islamic and conventional financial practices. Hence, contrary to what some people might think, trading is not illegal in Malaysia and is regulated by the Securities Commission Malaysia (SC).