Think & Create

There are two methods which you can apply for an IPO:

Refer to the chart below for a further understanding on how to apply for shares.

Investing Tips

Investing Tips

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The thought of buying and selling stocks can seem daunting for a beginner but it is quite simple and will grow on you quite quickly once you have some practice. One essential thing to know is that you must go through a broker to buy and sell stocks, only a licensed broker can deal directly with the stock market.

Engaging a Broker
Aside from making the purchases, a broker can also advise you on your purchases. However, you should not depend on them for market knowledge, you must do your own research to succeed in the market.

Click here for a list of brokers. Alternatively, you could look around for recommendations from friends.

Buying and Selling Online
Online brokers generally take less commission than other brokers, making online trading a more profitable alternative. Online trading does not come with expert advice but does normally come with live market updates so you can keep track of your purchases online and become an expert yourself.

Buying and Selling Stocks

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What types of stocks are there?

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The stock price is the market price of a stock. Using the Bursa Malaysia website you can view the price for any listed stock.

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:

• The financial section of the daily newspapers
• Bursa Malaysia Website.
• Your broker website may have an up-to-date list of stock prices
• 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.

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THE FTSE BURSA MALAYSIA INDEX SERIES

Bursa Malaysia Bhd and FTSE Group launched the FTSE Bursa Malaysia Index Series (FBM), a new suite of Malaysian tradable and benchmark indices. The decision to enter into a partnership with FTSE, a global equity and bond index provider is the distinct benefits in collaborating with FTSE.

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:-

1. 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.
2. Tradable – All stocks are liquidity screened to ensure stock availability and ease of trading
3. Easy to understand – Index rules are transparent and easy to understand.
4. Easy to anticipate – Clear and predictable rules
5. Representative – Accurately reflects the broad underlying market
6. Consistent – Given the same circumstances and data, the index will return the same result

Today, the family tree comprises of:

1. FTSE Bursa Malaysia EMAS Index
2. FTSE Bursa Malaysia Large 30 Index
3. FTSE Bursa Malaysia Mid 70 Index
4. FTSE Bursa Malaysia 100 Index
5. FTSE Bursa Malaysia Small Cap Index
6. FTSE Bursa Malaysia Fledgling Index
7. FTSE Bursa Malaysia EMAS Shariah Index
8. FTSE Bursa Malaysia Hijrah Shariah Index
9. FTSE Bursa Malaysia Second Board
10. FTSE Bursa Malaysia MESDAQ

Click here for more information on the FTSE Bursa Malaysia Index Series.

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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.

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As a stock trader, you will begin to pay more interest to the business section of your local newspaper. Most feature a section that deals with Stock Market prices at close of the previous day. In this section, you will come across the following descriptions:

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.

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To buy or sell shares on Bursa Malaysia, you need to use a registered broker who is a member of Bursa Malaysia. You cannot deal directly with Bursa Malaysia as only brokers have direct access to the market.
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 – click here for a list of all brokers.

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The stock market is where the shares in companies are bought and sold, providing companies options to access capital, and investors opportunities to own a share of the company and enjoy potential gains from the company’s future performance.

The stock market offers people the ability to generate a separate income stream apart from their daily jobs, or income streams which are superior to those from traditional savings deposits. But before you even think about buying and selling shares, you must know the fundamentals of the stock market and of trading.

First time investors can become confused because of the terminology that is used to describe various market functions. These don’t take long to learn. Click here for your basic share trading terms. Incidentally, one common confusion is over the terms ‘ stocks’ and ‘shares’. Actually, they both mean the same thing and can be used interchangeably.

The Role of Bursa Malaysia

You can only invest in stocks through a stock exchange, an organized marketplace where stocks are bought and sold under strict rules, regulations and guidelines. The Malaysian stock exchange is called Bursa Malaysia. Bursa Malaysia has over 1,000 listed companies offering a wide range of investment choices to local and global investors. Companies are either listed on Bursa Malaysia Securities Main Board for larger capitalised companies, the Second Board for medium sized companies or the MESDAQ Market for high growth and technology companies.

Raising Capital on the Stock Market

The Stock Market was created by companies wishing to raise capital for their business. When someone says they have a listed company they mean listed on Bursa Malaysia. All companies need cash to take advantage of growth opportunities. Many start-up companies however find themselves short of capital to fund expansion. One way to acquire this cash is to publicly float 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.

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Investing is making your money work for you by getting your money to generate more money.  Investing in stocks has consistently proven to be one of the most profitable forms of investment available.

The benefits include:

• 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.
• Easy monitoring — log in to the market from anywhere in the world.
• Being able to maximise returns whilst spreading your risk.
• A predictable form of investment if you know what you’re doing.
• Putting you in control and freeing you of fund management fees.
• Considerable tax advantages.

Things to watch out for:

• The market can be a volatile place.
• You must acquire knowledge of what you are doing.
• You must monitor your investments.
• You must learn the discipline to enter and exit the market on entry and exit signals.

Can Ordinary People Profit from the Stock Market?

Many people say things like “I’d love to get into the stock market” or “If I had more money, I’d invest in stocks”. Many people also believe that to make a profit from the stock market you either need to be rich already, be a full-time investment trader or be a financial whiz.

Not necessarily so.

Let’s take a look at three different scenarios of ordinary people in the stock market to see how they fared. This will let us view how the process works, the different approaches, and how returns are generated.

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 Manufacturing at RM1.33 a share (RM2,999.15). To complete her portfolio, Aminah buys a further 2,912 shares in MM Multimedia at RM1.03 a share (RM2,999.36) and 3,000 shares in BB Furniture at RM1.00 a share (RM3,000). Aminah also pays RM164.75 brokerage fees for buying the shares. In total, Aminah has invested RM1,5162.92.

12 months later Aminah sells her shares. Four of the shares have increased in value but BB Furniture has dropped to RM0.95 a share.   ABC Mining rose to RM1.19 a share returning RM3,966.27.   AAA Steel rose to RM2.60 a share returning RM5,270.20.  XY Manufacturing rose to RM1.38 a share returning RM3,111.90.   MM Multimedia rose to RM1.09 a share returning RM3,174.08.   BB Furniture dropped to RM0.95 a share returning RM2,850. In total, Aminah’s shares returned RM18,372.45 less RM164.75 for brokerage.  This gives a total of RM18207.70, earning a profit of RM3,044.78.

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