How To Open A Stock Brokerage Account In Malaysia
Ready to buy your first stocks, exchange traded funds (ETF) or real estate investment trust (REIT)? First you will need a stock brokerage account. Here’s how to open an account to buy stocks in the Malaysian stock market or international stock markets.
CDS direct account vs nominee account
Before opening a stock brokerage account, you will need to decide whether you want a Direct Central Depository System (CDS) account or a nominee account.
CDS is operated by Bursa Malaysia. It’s like a ledger that keeps a record of all of your stock holdings. When you buy shares of a publicly traded company, they will be credited to your CDS account. When you sell these shares, they will be transferred out of your account.
You can also open a nominee account. This means that your nominee (i.e. your bank or brokerage platform) will own the shares you buy, even though you will still be the real owner. Your nominee will help you manage all documents relating to the ownership of these shares.
Here are the differences between a CDS and a nominee account at a glance:
|Account name||Under the name of the shareholder||Sub nominated|
|IPO applications||Eligible||Not eligible|
|Administrative formalities (share splits, mergers, etc.)||Managed by the shareholder||Managed by candidate (on instruction; may charge fees)|
|The dividends||Credited directly to the shareholder’s account||Credited to the trust account; the nominee may charge a fee for processing dividend payments|
|Annual General Meetings (AGM)||Eligible to participate||Eligible, but requires a letter of proxy from the candidate|
|Annual Report||Sent directly to the shareholder||Sent to candidate; must be requested|
|Share transfers||Managed by the shareholder; can transfer to own account or to a parent’s account||Managed by candidate (may charge fees); can only transfer to own account|
If you are new to equity trading, it may be easier to sign up for a nominee account because your bank or brokerage platform will take care of the paperwork or administrative tasks for you.
But if you want more control over your investments, go for a CDS account. Your stock brokerage platform will help you open a CDS account when you sign up with them. If you open a second trading account on another platform, you will need to create another CDS account.
Cash vs margin account
Generally, brokerage platforms offer two types of accounts: a cash account or a margin account.
A margin account allows you to borrow money from your broker to buy stocks. The amount you can borrow can be based on the value of your money or stocks that you use as collateral (for example, borrow up to 2 times the money you have in your account). When you trade on a margin, you can potentially earn more gains because you borrowed money to buy more stocks. But on the other hand, if your stock price goes down, you will also suffer more losses.
A cash account is simpler: it only allows you to invest with the money you have in your account. When you want to buy stocks, you need to deposit money into your account to complete the transaction. As a beginner, it is probably best to minimize your risk by opting for a cash account.
Malaysia Stock Brokerage Fee Comparison
Next, it’s time to choose a stock brokerage platform. You might want to factor in the fees charged by the platform for executing a trade (you will be charged once when you buy stocks, and once more when you sell them). Here is a comparison of fees for online trading of stock brokerage platforms in Malaysia:
Besides these fees, you will also have to pay a clearing fee of 0.03% (up to a maximum of RM1,000 per contract) and a stamp duty of RM1 for every RM1,000 in transaction value (up to a maximum RM200 per contract). .
Based on our comparison, Rakuten seems to offer the lowest fees, starting at RM7. While the price differences may seem small – it’s only a few ringgits, after all – if you do one or two transactions per month for an entire year, the savings can add up.
To open an account with any of these brokers, all you need to do is visit their website and register online. They will usually ask you for the following:
- A fee of 10 RM for opening your CDS account
- Latest bank statements, EPF statement, pay slips or EA form
- Copies of your NRIC or passport
Once your request is approved, you can start trading.
Comparison of international brokerage accounts
You can buy stocks overseas with local brokers, but it can get expensive. Local brokers can charge a minimum of US $ 25 for the purchase of US stocks. This makes international equities inaccessible if you don’t have a lot of money to invest. For example, let’s say you want to invest 5,000 RM – a fee of $ 25 would mean paying around RM100, or 2%, in fees. What if you have even less money? Investing RM1,000 would mean paying 10% fees!
For purchases of shares abroad, it might be cheaper to buy them through an international brokerage account. They usually charge a much lower fee:
|Charles Schwab||WE||0% commission for online actions||Minimum of 25,000 USD to open an individual account|
|Interactive brokers||30+ countries||● Fees vary depending on the market|
● 0% commission for US ETFs
● For US equities: $ 0.005 per share or minimum $ 1, maximum 1%
|Sax||36 exchanges||● Fees vary depending on the market|
● For American stocks: 0.02 USD per share or 10 USD minimum
|TD Ameritrade Singapore||WE||0% commission for US stocks and ETFs|
Note: These international brokers are not regulated by the Securities Commission (SC) Malaysia, but are licensed and regulated in the United States (Charles Schwab, Interactive Brokers), Europe (Saxo), and Singapore (TD Ameritrade Singapore).
These platforms make foreign stocks more accessible. But keep in mind that if you invest in US stocks, your dividends will be subject to a 30% withholding tax.
To open an account with these brokers, visit their websites and register online. They will usually ask you for proof of your identity (passport, driver’s license, national ID card, etc.) and proof of address (mortgage statement, utility bills, etc.).
How do some foreign brokers charge zero fees?
If you have looked through the table above, you may have noticed that some foreign brokers do not charge any fees. How do they do this? Usually in a few ways:
- Interest returns. Your broker can invest or lend your uninvested assets.
- Payment of the order flow. When you buy or sell stocks, your broker may not perform the trade themselves. Instead, they direct it to another company that processes the transaction and pays your broker a fee.
- Sell your data. Your broker can collect data about you – such as which banks you use or how much you earn – and sell it to others who want to market financial products to you.
But before you start trading …
Investing directly in stocks has its advantages: you will have more control over your investments and you will pay minimal fees (you do not pay fund managers or other third party platforms to manage your investments).
But buying individual stocks has a steep learning curve. You will need to analyze each stock to determine if it is a good buy, keep up to date with company news, and have nerves of steel to withstand market shocks.
As a beginner, you can start by focusing on ETFs, which allow you to buy a group of stocks at a time. By spreading your money over many stocks at once, you will reduce the risk in your portfolio. You can also invest through mutual funds, which are similar to ETFs, but are purchased through financial institutions or platforms rather than on the stock exchange. You can also invest through a robotics advisor like StashAway, who takes care of the investment decisions for you. Whichever route you choose, just make sure you don’t go blindly and take more risks than you can afford.
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