The basic facts to know before trading on Bursa Malaysia

Bursa Malaysia was listed in 2005 as the official stock exchange of Malaysia. It provides all the services for trading in securities ranging from listing and trading to clearing and settlement. Bursa Malaysia also provides investors with depository services for securities and derivatives market.

Bursa Malaysia’s worth is over RM 5 billion according to the market capitalization and is one of the prominent names in South-East Asian stock exchanges. Let us now discuss about some facts about Bursa Malaysia which you should know before you invest.

Table of Contents

The basic facts to know before trading on Bursa Malaysia

Primary Income Source

Income from Derivatives Trading

Dependency on Technology

Reduction in Cost to Income Ratio

Dividend Payout Ratio

Primary Income Source – It is no wonder that the stock market is the main and primary source of income for Bursa. It accounts for over 70 per cent of the total revenue of the bourse. There are around 900 companies which are publicly listed with a combined market cap of over RM 1.6 trillion.

Income from Derivatives Trading – Derivative trading is the second largest income source for Bursa Malaysia. Derivatives account for 21.8 per cent of the stock exchange’s total revenue. Bursa currently offers trading in three derivatives. This include, equity derivative, currency derivative and financial derivatives. Bursa is also accredited a s a market leader when it comes to crude palm oil contracts (CPO). For the settlement of CPO prices, these contracts are considered to be a global benchmark.

Dependence on Technology – Bursa Malaysia heavily relies on technology and IT services. Since the exchange trades using electronic trading system, it has a network of internet lines and high-end systems which are used for trading. Such heavy dependence on IT also increases the risk of cyber threats, therefore, the management has taken all the necessary steps to mitigate any potential risk by implementing high end cyber security.

Reduction in Cost to income ratio – One of the major expenses of the stock exchange are the payouts for the staff which are rising with a CAGR of 5.10 per cent from the last few years. This growth is well controlled and is lower than the overall profit growth of exchange. As a result, Bursa Malaysia has been able to maintain a steady profit of around 30-40 per cent over the last few years.

Dividend Payout Ratio – In the year 2013 and 2014, Bursa Malaysia paid 20 sen per share as special dividend. Both these years exceeded 100 per cent of its dividend payout ratio. If Bursa maintains its dividend payouts, the dividend yield will be over 3 per cent.

Conclusion

Over the last few years, Bursa Malaysia has emerged as one of the prominent stock exchanges of Southeast Asia. Bursa has been providing in house services for all financial trading including investing, clearing and settlement and also depository services. If you are trading on Bursa Malaysia you can get research based trade recommendations from an investment advisor which will help you in enhancing your trading experience.