How to buy stocks in Malaysia
Malaysia’s growing economy and the high literacy rate make it an ideal environment for domestic and foreign investment. In addition, the strong financial sector provides the opportunity to invest and trade stocks.
To participate in the stock market, you will need to pick a reliable broker. Read on to find out the best stock trading platforms in Malaysia, factors to consider when choosing a stock to trade, trading strategies, and much more.
Top 5 trading platforms in Malaysia
- eToro- Best for all types of traders
Since its establishment in 2007, eToro has grown to become the leading trading platform with millions of users from around the world. The main reason why the platform is popular is its effort to make stock trading accessible. It is fully regulated and abides by the guidelines set by CySEC, ASIC, and FCA. In addition, the client’s funds are put in segregated accounts in tier-1 banks.
The initial minimum amount required to open a standard account on eToro is MYR 800 ($200). Also, eToro offers a free demo account that looks entirely like the live account with a $100,000 virtual currency. There is also an Islamic account, though you have to request it.
eToro has a proprietary trading platform that can be accessed directly through your web browser. It has an intuitive interface that is easy to navigate. For example, to access the available assets, just click on the ‘Trade markets’ in the function menu. There is also a mobile trading app that has the same look and feel of the web version with well-organized menus and responsive charts. On the downside, it offers few indicators, and drawing tools are missing.
The broker charges a fixed 0.09% spread per side, which is slightly higher than the industry average. However, the slippage is extremely low compared to other brokers. There is also the overnight fees for trades left open overnight, a conversion fee, MYR 20 ($5) withdrawal fee and MYR 40 ($10) inactivity fee.
In terms of education, the platform has a section known as the ‘Interactive Trading Course’ that is divided into a trader course and investor course. Also, there is a guide to walk you through the platform in five simple steps. However, the education materials are quite shallow and limited for experienced traders.
Pros
- Accepts clients from Malaysia
- Numerous payment option
- Easy to use and navigate
Cons
- Shallow and limited education materials
- Plus500- Best for novice traders
Plus500 is a streamlined stockbroker that has been in the industry since 2008. It is licensed and regulated by renowned regulatory bodies such as FCA in the UK, ASIC in Australia, and CySEC in Cyprus. The broker offers a wide range of stock indices at relatively low spreads and no commissions.
The process of opening an account on Plus500 is straightforward, where you only need to fill the registration form and complete the verification process. The minimum deposit required is MYR 400 ($100) for the standard account. Plus500 also offers a professional account, which you must have performed at least ten transactions per quarter for one year to qualify. There is also the demo account is free and unlimited.
Plus500 support numerous deposit and payment methods that include debit/credit cards, bank transfer, Skrill, and PayPal. There is no deposit fee, and withdrawal is free for five times in a month, after which you will be charged MYR 40 ($10). Note that every deposit must originate from your personal bank or e-wallet account.
The Plus500 proprietary trading platform is user-friendly, efficient, and very swift and is available for desktop and web. It comes with advanced charting tools and numerous risk management tools such as guaranteed stop, trailing stop, etc. There is also the mobile trading platform that comes with free email and push notifications, alerts on the percentage change, and other features.
Plus500 does not charge commissions but features both dynamic and fixed spreads. Also, there are swaps rates for overnight leveraged positions, 0.3% currency conversion fee, and MYR 40 ($10) inactivity fee for an account that has been dormant for more than three months.
Pros
- Easy to use trading platforms
- Free demo account
- No deposit fee
Cons
- Inactivity fee
- Pepperstone- Supports numerous payment options
Pepperstone has enjoyed remarkable growth since its establishment in 2010. It is a safe broker to trade and invest stock because it is regulated and licensed by highly credited bodies such as the Australian ASIC as well as the UK’s FCA. The numerous trading platforms, extensive educational materials, multiple account types, and tight spreads will appeal to both novices and professional traders.
Opening an account on Pepperstone is very easy, where you only need to provide your name, country of residence, email address, and create a password. The minimum deposit amount is zero, which means you can start trading stock with as low as MYR 40 ($10). It offers three main trading accounts that include Razor, standard, and swap-free.
This platform provides numerous options to deposit funds that include bank wire transfer, debit/credit cards, PayPal, Skrill, Neteller, and QIWI. Note that withdrawals with all the methods can be processed on the same day if requests are made before 8 am GMT. On the downside, the wire transfer withdrawal can take up to 5 days.
Trading costs on Pepperstone depends on the type of account you are using. For example, the spreads charged vary because prices are affected by liquidity and derived from multiple sources. There are no commissions charged on the standard and swap-free accounts. However, you will be charged commissions per lot on the razor account.
Pepperstone’s customer service is available 24/5 through email, phone, and live chat function on the website. The support is quick and offers relevant answers. Alternatively, you can contact support through Pepperstone’s social media platforms.
Pros
- Competitive spreads and commissions
- Regulated and licensed by credible agencies
- Reliable customer support
Cons
- Limited educational materials
- Rakuten trade- Best for Malaysian traders
Rakuten trade is a joint venture between Malaysian Kenega Investment Bank Berhad and Japanese Rakuten Card Company. In addition to Malaysian-based shares, it will give you access to trade ETFs, REITs, etc.
It started its operations in 2017 to become the first digital equity broker in Malaysia. Rakuten’s web-based trading platform features the live markets, execution, and settlement of trades. In addition, it offers access to a wide range of technical indicators and other analysis tools.
The education section features a series of self-produced YouTube videos on investment and trading strategies in both English and Malay. Rakuten also provides extensive research and blog on the Malaysian shares.
One of the most noticeable features on the Rakuten trading platform is the ‘stock info’ that presents the basic information of stock. The chart will allow you to get historical prices of up to 5 years while the fundamental ratio page offers various ratios such as valuation ratio, price-related ratios, etc.
For Malaysian shares, Rakuten charges a commission of MYR 7 per transaction and 0.106% of the value of the stock traded. The customer support is reliable and can be accessed through the website, toll-free telephone, email, message through WhatsApp, and international numbers.
Pros
- Offers Malaysian-based shares
- Extensive research tools
- Reliable customer support
Cons
- Limited education materials
- Hong Leong broking- Best for international markets
Hong Leong Broking is one of the most prominent stockbrokers on Bursa Malaysia. It offers various services such as retail and institutional stockbroking services, margin accounts and financing, equity research, custody services and more. In addition, it provides all the necessary information and tools to make better and faster trading decisions.
Its web-based trading platform is easy to use and navigate and features real-live streaming quotes, equity tracker, and more. The commissions charged are high at MYR 8.48 per transaction, and 0.106% of the value of the shares traded.
Apart from Malaysian based shares, HLeBroking will allow you to trade stocks listed on exchanges in Singapore, the UK, the United States, Hong Kong, Thailand, Australia, etc. Customer support is reliable and can be accessed through email, telephone, and fax.
Pros
- Offers both retail and institutional stockbroking services
- Easy to use trading platform
- Access to international markets
Cons
- High trading costs
What is stock trading in Malaysia?
Stock trading refers to the buying and selling shares to take advantage of the price fluctuations. The first step to becoming a stock trader in Malaysia is to find a suitable broker. You can either open a trading account with a local based or international broker as long as they are regulated and licensed.
Previously known as the Kuala Lumpur Stock Exchange, the Malaysian main stock exchange is known as Bursa Malaysia. To participate in the exchange, you will need to open two accounts: a Central Depository System (CDC) and a trading account. A CDS account comprises of an electronic book-entry system that records and tracks your share ownership and stock transfers. It is directly maintained by Bursa Malaysia without any connection to the brokers. Fortunately, most brokers will help you in the CDS account opening process when you open a trading account.
Factors to consider when choosing a stock trader
Before opening an online stock trading account in Malaysia, you should consider the following.
- Regulation and exchange membership
You should choose a stockbroker that is fully registered and licensed by the Securities Commission Malaysia (SCM) and authorized to operate on the Malaysia Bursa. If it is an offshore broker, it should also be regulated by respectable regulatory agencies. Avoid platforms that are not registered because they might be scams.
- Trading platform
A reliable online trading platform should provide access to accurate stock quotes and allow you to enter orders and receive a confirmation on stock orders. It should be easy to access and navigate and customize to suit your needs. Choose a platform that also offers technical analysis tools and news feeds to make better trading decisions.
- Research
Whether it is an international or local premium broker, it should offer advisory services and research. It only makes for a full-service broker to give you advice on investment matters. Otherwise, you are better off with a cheaper broker that does not claim to offer premium services.
- Trading cost
No matter the trading style you use, trading costs such as commissions and spreads can significantly influence your bottom line, especially if you are an active trader. Even if you don’t trade often, you should consider a platform with affordable fees.
- Customer service
Choose a platform with reliable customer service so that you can get your issues addressed promptly. The support should be accessed through a variety of ways such as email, live chat, or even phone.
Stock analysis strategies
To become a successful stock trader, you must use viable stock analysis strategies to find potentially profitable stocks. There are numerous stock analysis methods you can use depending on your personal preference. Here are some of the most popular methods.
- Technical analysis
Technical analysis involves the study of supply and demand for stock in the market. Investors who use this method believe that the historical performance of a stock influences its future performance. Little attention is given to the strength and weaknesses of the company. This method places a lot of emphasis on the study of charts, trends, and patterns.
- P/E ratio
Another popular way to analyze stock is to study the price-to-earnings ratio. To calculate the P/E ratio, divide the stock market value per share with its earnings per share. Compare the stock’s P/E ratio with that of its competitors and the industry average to determine the value. Most investors prefer stocks with lower P/E ratios.
- Earnings-per-share
The earning-per-share (EPS) ratio shows how a company’s revenue trickle down to its investors. An increasing EPS is a good sign to buy the stocks. The higher a company’s earnings-per-share, the more your shares are worth since most investors like to purchase stock when the company’s earnings are high.
- Price-to-earnings growth (PEG) ratio
The price-to-earnings-growth ratio is an extension of the P/E ratio that takes into account the growth of a company. Divide the P/E ratio by a 12-month growth rate to determine the PEG. Looking at the company’s historical growth rate will enable you to estimate the future growth rate.
- Book value
Another method to analyze stock is to look at the company’s price-to-book ratio. This method will help you find companies that are undervalued, yet they have a high-growth. To get the P/B ratio, divide the market price of a company’s stock by its book value of equity. Note that the book value of equity is acquired by subtracting the book value liabilities from the value of assets. A low P/B ratio shows that the stock is potentially undervalued.
Specific stock trading strategies
The best way to become consistently profitable in stock trading is to use a set of sound trading strategies. You are doomed to fail if you use trading strategies that are poorly tested and unsuccessful. Here are the most common trading strategies you can use.
- Day trading
This is perhaps the most common strategy used by active traders, which involves buying and selling stocks on the same day. With this trading style, you don’t hold a position overnight, which means you will have to close positions the same day you open. Initially, this strategy was mostly used by professional traders, but electronic trading has made accessible even to novice traders.
- Scalping
This is a fast-paced and highly intense trading style where you make trades within just a few seconds or minutes. It is the best strategy for active traders who make immediate decisions and act on them without hesitation. Scalping requires focus and high concentration, and it may not be an ideal trading style if you are easily distracted.
- Swing trading
Swing trading seeks to capture the gains of a stock as it attains short-term momentum, usually a few days. This trading style requires a larger stop-loss order than day trading. It may not be a suitable style if you are afraid of holding an open position overnight.
- Position trading
Position trading is a buy-and-hold strategy that can last for several years, making it suitable for the most patient and least excitable traders. This trading style requires the ability to ignore popular opinion because a single trade is long-term and can go through both bull and bear markets. For example, you can hold stock throughout the year, no matter the changes in the market. Position trading may not be an ideal option for you if you are a technical trader and swayed by the happenings in the market.
5 stock trading tips
The stock market is not based on luck but involves a lot of hard work, dedication, patience, and skills. To become a successful trader, you should know how to diversify your investment portfolio, control your financial risk, and avoid unnecessary losses. Here are five exciting tips to help you become a better stock market.
- Create long-term objectives
There is no guarantee that you will get back your capital within six months or one year. Note that the growth of your profile depends on the capital you invest, the investment period, and the company’s earnings. The more you save, the better the return on investment. Therefore, it is advisable to set long-term objectives instead of withdrawing your funds frequently.
- Know your risk tolerance
Risk tolerance defines how much you are willing to stake for a particular outcome. In the beginning, most people have a low-risk tolerance because they are unfamiliar with the market. However, as you learn more and understand the market, volatility, liquidation, and other crucial elements, you start to make more informed decisions. Know your risk tolerance level to avoid investing in the wrong stocks.
- Diversify your portfolio
Most smart investors hold shares of different companies, industries, and even countries. This is also known as diversification of risks and ensure that the financial loss of one company does not affect other investments.
- Control your emotions
Due to the high volatility in the stock market, emotions can make you take negative actions. No one can predict when the price of the stock will go up or down, and most people make decisions based on emotions. The best way to avoid trading with emotions is to plan your strategies ahead of time.
- Understand the basics
Before investing your money in the stock market, you should learn the basics first. There are plenty of terms and aspects of the stock market that you need to understand.
Conclusion
The stock market offers an excellent opportunity to trade and invest in stocks. In Malaysia, you can open a trading account with either a local or international broker as long as a renowned regulatory agency regulates it. However, you should understand that the stock market is very volatile, and there are high chances of making losses.
Frequently asked questions (FAQ)
- How can I determine the best stock to invest in?
There are numerous indicators and tools you can use to gauge a stock’s health before investing in it. Some of the most common strategies include price-to-earnings ratio, earnings-per-share ratio, etc.
- What is a dividend in the stock market?
A dividend is a portion of the company’s profit that is shared among shareholders. In most cases, dividends are paid out per share quarterly.
- What is the meaning of shorting a stock?
This is when you borrow shares and immediately sell them with the hope of making a profit. This is much riskier than taking a long position.
- What online stock broker should I use?
When you are starting to trade stock, it does not matter what broker you are using as long they are registered by a reputable body. Get a broker that offers proper technical tools, news feeds, and fast trade executions.
- What are the types of stocks?
There are three main types of stocks that include common, preferred and unlisted stock.