Want to start trading in the KLSE market, but don’t know where to start? Well, today we will discuss about how you can start stock trading in Malaysia and what should be your minimum investment amount.
What are lots?
Bursa Malaysia is a fully integrated exchange based in Malaysia and offers a complete range of trade and investment services including depository services, clearing and settlement services and trading. You can trade on Bursa Malaysia by buying or sharing shares in the form of lots. The minimum you can buy, or sell is 1 lot.
A minimum of 1 lot is required when investing in equities in Malaysia, and 1 lot equals 100 shares. Let's imagine you decide to buy one lot of Nestle Malaysia at RM70 per share. For this minimum transaction, you'll need to shell out RM7,000. This is why some people consider Nestle to be an "expensive stock." However, this is a false statement because the only thing about Nestle in this case that is ‘expensive' is its minimum investment.
Bursa’s Limit Ups and Downs
Limit ups and limit downs are price limits that limit how much a stock on the KLCI can rise or fall in a single day.
The upper limit price for KLCI component stocks trading at RM1 per share and higher is restricted at 30% intraday, while the lower limit price is capped at -15 percent intraday. An RM1 stock, for example, may rise to RM1.30 in a single day. You can still trade it, but the price is restricted at RM1.30 for the duration.
The upper limit is set at +30 sen for stocks with a price below RM1 and the lower limit is set at -15 sen for stocks with a price below RM1.
There is also an overall circuit breaker for the entire KLCI. As of this writing, there are two levels: 10% and 15%.
The first level is reached when the FBM KLCI falls by a total of 10% or more but less than 15% of the preceding market day's closing price. Depending on when time of day it is triggered, trading would be paused for an hour or the rest of the day.
The second level is reached when the FBM KLCI falls by 15% or more from the previous day's closing price. Trading will be halted for the remainder of the day if this occurs.
To control enthusiasm and/or terror, circuit breakers and limits are used. It's a safety net put in place to allow the market to catch its breath and slow down. They're especially important for stopping a free fall, and they've proven to be effective so far.
Minimum Investment for trading on Bursa Malaysia stocks
The average brokerage rate charged by brokers is 0.1 percent, with an RM8 minimum brokerage. With these charges, the minimum amount you should technically trade at is RM8/0.1 percent = RM8,000, since you will be charged a minimum of RM8 anyhow. This does not account for stamp duty, clearing costs, or GST.
The Malaysian government imposes the stamp duty. You must pay RM1 for every RM1,000 that is rounded up to the closest ringgit, up to a maximum of RM200.
Bursa Malaysia, the exchange's clearinghouse, charges a clearing fee. The charge is 0.03 percent of the contract value or the value of the shares, up to RM1,000.
These fees will set you back roughly 0.25 percent per deal. If you trade below the RM8K minimum level, you will earn even more.
With that in mind, it is recommended to start with RM8K, but everyone who is just starting out is comfortable spending that much, therefore the smallest amount one should use to make a trade should be RM3K. Don't worry if you don't have a large sum set up, an investment advisor can help you in starting your trading journey with small amounts as well.
