Stock Market
Prepared by Dr Izaan Jamil
Bursa Malaysia
• Stock market provides means of rising funds by companies by
issuing stocks and shares (Initial Public Offering – IPO) and also
the trading of shares in the secondary markets.
• This is where the role and functions of Bursa Malaysia comes in.
• It is a stock exchange that started off as the Malayan Stock
Exchange in 1960, changed its name to KLSE in 1976, and then to
Bursa Malaysia in 2004 to reflect a more important role and in line
with the objectives of becoming an important and dynamic stock
exchange in the region.
• Bursa Malaysia is an avenue for investors, retail or institutional, to
invest on the various product available supervised by the Security
Commission.
Bursa Malaysia Securities
Berhad
• This is an exchange that provide facilities for both retail and
institutional investors to buy and sell securities.
• Financial products may include shares of public listed companies,
loan stock, debenture stocks, warrants and bonds.
• The exchange is divided into two boards namely Main Board and
ACE market.
• The Main Board comprised of large capitalization companies and
is divided into various sectors reflecting sectors of economy in
this country.
• The ACE Market provide an avenue for relatively smaller but
viable companies to tap funds from the public for business
expansion.
Example of Companies listed on
Bursa Malaysia
FTSE Kuala Lumpur Composite
Index (KLCI)
• An index is a form of measurement of the
performance of a particular stock market.
• It gives an indication of how well is the market
that you are interested to know whether it is
bullish or bearish.
• Besides as a form of measurement of
performance, an index can be used as:
• Benchmark to measure a portfolio’s performance.
• Forecast future market behaviour of a particular
stock market.
Extracted from Kenanga Trading Terminal on 4th
September 2024
Major
World
Market
Indice
s
Extracted from Investing.com on 4th September 2024
Brokerage Firms
• The brokerage firms act as intermediaries between the
client and the operations of the exchanges.
• Briefly, an investor would already have opened account
with a stock broking firm before they can buy and sell
stocks.
• This institution plays an important role in the trading of
common stock due to its having the authorized
accessibility to the trading and settlement systems of
the stock exchange.
• In Malaysia, the development has seen a lot of stock
broking firm merged with or taken over by investment
banks to provide more efficient services to investors.
List of Brokerage Firm in
Malaysia
How much do I need to buy a
stock?
How much capital do I need to start
trading?
This is one of the most common questions for retailers
looking to start investing in the stock market.
Costs of Buying and Selling Stocks in
Bursa Malaysia
• When trading on Bursa Malaysia, investors are subject to several
fees and charges associated with the buying and selling of
securities.
• These charges is standardized across all brokerage firms and the
charges are:
• Brokerage Rate
• Clearing Fee
• Securities Commission Levy
• Stamp Duty
• Service Tax
• The total cost of a transaction includes these fees, so it’s essential
to consider them when calculating potential profits or losses.
• Understanding these fees can help you manage your investments
more effectively, ensuring that you are aware of all the costs
involved in trading on Bursa Malaysia.
Disclaimer
Information provided regarding the fees
and charges associated with trading on
Bursa Malaysia is for study purposes
only and may not reflect the most
current rates. These fees are subject to
change, and it's advisable to check with
your broker or Bursa Malaysia for the
latest and most accurate information.
Brokerage Fee
• The brokerage rate is a fee that you pay to the broker for
executing your buy or sell orders.
• This fee is usually a percentage of the total transaction value.
• The actual rate can vary depending on the broker, the type of
trading account, and the size of the transaction.
• Typically, the brokerage rate in Malaysia ranges from 0.05%
to 0.7%, with a minimum charge applied, such as RM8 to
RM12 per transaction.
• Example Calculation:
• Transaction Value: RM10,000
• Brokerage Rate: 0.60%
• Brokerage Fee: RM10,000 × 0.60% = RM60
Clearing Fee
• The Clearing Fee is charged by Bursa Malaysia to cover
the costs of clearing and settlement of trades.
• It is a percentage of the transaction value, typically set
at 0.03% of the contract value.
• Example calculation:
• Transaction Value: RM10,000
• Clearing Fee: RM10,000 × 0.03% = RM3
SC Levy (Securities Commission
Levy)
• The SC Levy is a regulatory fee imposed by the
Securities Commission Malaysia.
• It is charged on both buy and sell transactions, and the
rate is set at 0.005% of the contract value.
• Example calculation:
• Transaction Value: RM10,000
• SC Levy: RM10,000 × 0.005% = RM0.50
Stamp Duty
• Stamp duty is a government tax imposed on the
transfer of shares.
• In Malaysia, the stamp duty is charged at a rate of RM1
for every RM1,000 or fractional part of RM1,000 of the
transaction value.
• Example calculation:
• Transaction Value: RM10,000
• Stamp Duty: RM10,000 ÷ 1,000 × RM1 = RM10
Service Tax
• The Service Tax is levied on the brokerage fee at a rate
of 6%.
• This tax is part of the Sales and Service Tax (SST)
system in Malaysia and applies only to the brokerage
fee, not the entire transaction value.
• Example calculation:
• Brokerage Fee: RM60 (from previous example)
• Service Tax: RM60 × 6% = RM3.60
Example 1
• You are buying 50,000 unit of shares at RM1/share. The
brokerage rate is 0.60%, and all other applicable fees are the
clearing fee (0.03%), SC levy (0.005%), stamp duty (RM1 for
every RM1000), and service tax (6%) on the brokerage fee.
Calculate the total cost of the purchase, including all fees.
• Solution:
• Value of purchased share: 50,000 units x RM1 = RM50,000
• Brokerage rate: RM50,000 x 0.6% = RM300
• Clearing fee: RM50,000 x 0.03% = RM15
• SC levy: RM50,000 x 0.005% = RM2.50
• Stamp duty: RM50,000 ÷ 1000 × RM1 = RM50
• Service tax: RM300 × 6% = RM18
Thus, the total cost of the purchased share is:
RM50,000 + RM300 + RM15 + RM2.50 + RM50 + RM18 = RM50,385.50
Example 2
• You are buying 10,000 unit of shares at RM3/share. The
brokerage rate is 0.10%, and all other applicable fees are the
clearing fee (0.03%), SC levy (0.005%), stamp duty (RM1 for
every RM1000), and service tax (6%) on the brokerage fee.
Calculate the total cost of the purchase, including all fees.
• Solution:
• Value of purchased share: 10,000 units x RM3 = RM30,000
• Brokerage rate: RM30,000 x 0.10% = RM30
• Clearing fee: RM30,000 x 0.03% = RM9
• SC levy: RM30,000 x 0.005% = RM1.50
• Stamp duty: RM30,000 ÷ 1000 × RM1 = RM30
• Service tax: RM30 × 6% = RM1.8
Thus, the total cost of the purchased share is:
RM30,000 + RM30 + RM9 + RM1.50 + RM30 + RM1.8 = RM30,072.30
Example 3
• Stock market is down, and you are selling 50,000 unit of your shares at
RM0.90/share. The brokerage rate is 0.60%, and all other applicable fees are the
clearing fee (0.03%), SC levy (0.005%), stamp duty (RM1 for every RM1000), and
service tax (6%) on the brokerage fee. Calculate the total cost of the sell,
including all fees.
• Calculate the profit/loss if the value of purchased share is RM50,385.50 (from
example 1)
• Solution:
• Value of sold share: 50,000 units x RM0.90 = RM45,000
• Brokerage rate: RM45,000 x 0.6% = RM270
• Clearing fee: RM45,000 x 0.03% = RM13.50
• SC levy: RM45,000 x 0.005% = RM2.25
• Stamp duty: RM45,000 ÷ 1000 × RM1 = RM45
• Service tax: RM270 × 6% = RM16.20
The total cost of the sold share is:
RM45,000 + RM270 + RM13.50 + RM2.25 + RM45 + RM16.20 = RM45,346.95
Profit/ loss: Total purchased – total sold: RM50,385.50 – RM45,346.95 = RM5038.55 (loss)
References
• Slater, J. & Wittry, S. (2023). Practical Business Math
Procedures. McGraw Hill.
• Rohani, A.G. (2018). The development of Malaysian
Financial Institutions. 2nd Edition. UiTM Press.
• Petty, J.W., Titman, S., Keown, A.J., Martin, P. Martin, J.D.,
& Burrow M. (2015). Financial Management: Principles
and Applications. Pearson Australia.
