Investment Market and
Transaction
Learning Goals
 Differentiate between primary market and secondary
market
 Basic types of transaction
 How to buy and sell shares
 Malaysian Security Market Regulations
Introduction
 Securities markets are forums that allow suppliers
and demanders of securities to make financial
transactions.
 How firms issue securities?
Primary Market
 New stocks, bonds or other securities that offered to
the public by investment bankers
 Two types of primary market issues of common stock
 Initial Public Offering


Public offering
Private placement
 Seasoned New Issued
 Public offering
 Private placement
 Right offering
 Stock splits
IPO Process
 First, obtain the approval of it current shareholders
 Auditors and lawyers must also must certify that all documents for the
company are legitimate.
 Then, finds an investment bank who willing to underwrite the offering.
 The company files a registration statement with the SC (Security
Commissioner), which includes PROSPECTUS that describes the key aspects of
the issue, the issuer, and its management and financial position.
 After SC approves the registration statement, the price of the offered to the
public securities will be announced.
 The investment bankers and company executives promote the company’s stock
offering through a road show, a series of presentations to potential investors
around the country and sometimes overseas.
Reason for getting listed
 Higher Profile
 Confidence
 Additional Funds
 Expansion
Secondary Market
 Once securities are issued to the public,
investors may trade them among themselves
in the secondary market. The secondary
market will provide liquidity to the sellers.
 is an organized exchange which securities
are traded after they have been issued.
Development of the Malaysian
Securities Industry
 1930 - Singapore Stockbrokers’ Association – the first
formal organization in the securities business in Malaysia.
 1937- Re-registered as Malayan Stockbrokers’ Association,
but still no public trading of shares.
 1960- Malayan Stock Exchange formed and public trading
of shares began on 9 May.
 1964- Stock Exchange of Malaysia formed.
 1965- With the secession of Singapore from Malaysia, the
common stock exchange continued to function but as the
Stock Exchange of Malaysia and Singapore (SEMS).
 1973- With the termination of currency interchangeability
between Malaysia and Singapore, the SEMS was separated
into The Kuala Lumpur Stock Exchange Bhd (KLSEB) and
The Stock Exchange of Singapore (SES). Malaysian
companies continued to be listed on SES and vice-versa.
 1973- A new company limited by guarantee, The Kuala
Lumpur Stock Exchange (KLSE) took over operations of
KLSEB as the stock exchange. In 1994, re-named Kuala
Lumpur Stock Exchange.
 2004-
Kuala Lumpur Stock Exchange became a
demutualised exchange and was re-named Bursa Malaysia.
Regulatory Structure
 Securities Industry Act 1983
 Securities Industry (Central Depositories Act) 1991
 Securities Commission Act 1993
 Companies Act 1965
Types of Securities Traded on
Bursa Malaysia
 Share Capital
 A share is a security which represents a portion
of the owner's capital in a business
 Different types of shares:


Ordinary shares
Preference shares
 Fixed Income Securities
 Debentures/Debenture Stocks
 Loan Stocks
Unsecured loan stocks
 Convertible loan stocks
 Notes
 Bonds

 Others
 Warrants/Transferable Subscription Rights
(TSRs)
 Call Warrants
 Property Trusts
 Closed-end Funds
Bursa Malaysian Derivatives
Exchange (MASDEQ)
 Launched on 11 Jun 2001 as Integrated Malaysian
Derivate Exchange. It offers varieties of derivative
products and services including option and futures of
KLSE Composite Index, Crude Palm Oil Futures and
KLIBOR (Kuala Lumpur Inter Bank Offer Rate)
futures.
Main Board
 Listing requirement
 Minimum paid up capital of RM 60 million consists of
ordinary share valued 10 sen per share,
 At least 25% of paid up capital and issued upon listing
must be hold by the public share holders,
 Up to 5% of the issued and paid-up capital which held
by the employees; and
 Up to 10% of the issued and paid-up capital of the
company which is held by the Bumiputra investors for
the purpose of compliance with the National
Development Policy (could make up the 25% public
spread).
 The company is required to have, upon listing the following
minimum number of public shareholders holding not less than
1,000 shares each as follows;
Nominal value of Issued
capital
Minimum number of
shareholders and paid-up
RM 40 million to less than
RM 60 million
750
RM 60 million to less than
RM 100 million
1,000
RM 100 million and above
1,250
Second Board
 Listing requirement
 Minimum paid-up capital of RM 40 million consists of
ordinary shares valued 10 sen per share,
 At least 25% of paid up capital and issued upon listing
must be hold by the public share holders,
 Up to 5% of the issued and paid-up capital which held
by the employees; and
 Up to 10% of the issued and paid-up capital of the
company which is held by the Bumiputra investors for
the purpose of compliance with the National
Development Policy (could make up the 25% public
spread).
 The company is required to have, upon listing the following minimum
number of public shareholders holding not less than 1,000 shares each
as follows;
Nominal value of Issued
and paid-up capital
Minimum number of shareholders
RM 40 million to less than
RM 60 million
750
RM 60 million to less than
RM 100 million
1,000
RM 100 million and above
1,250
MESDAQ
 Malaysian Exchange of Securities Dealing and Automated
Quotation Bhd (MESDAQ) is a wholly owned exchanged. It
was launched on 6 October 1997 as the subsidiaries of
KLSE and SCAN. MESDAQ will cater for technology based
companies and companies with strong growth potential
but which do not have a profit track record. MESDAQ can
be expected to make an important capital market
contribution to the development of Multimedia Super
Corridor (MSC).
 The minimum requirement for paid up capital at least RM2
million for technology and non-technology company and
RM20 million for technology incubator company that
comprising ordinary shares of RM1.00 each, no historical
performance etc. as long as the company is being
recognized as technology based company with strong
growth potential and have the contribution to the
development of MSC.
Over-The-Counter (OTC)
 Is a trading that is not traded on organized exchanged. It consists of a
network of thousands of dealers in particular industries.
 Trading System
 Since May 1989, KLSE has started a semi-automated and become fully
automated in October 1992. The system was enhanced in 1994 and in
1995; all stock broking companies were equipped with the KLSE’s latest
computerized broker front-end system known as WinSCORE system
 Trading Activity
 KLSE is not a place to trade. Trading activity was done in a
stockbroking company
 There are two (2) trading sessions on any market day:
Morning Session :
Afternoon Session :
9.00 a.m. - 12.30 p.m.
2.30 p.m. - 5.00 p.m.
Types of Orders
 Limit order –to be executed at the entered price or
better
- Order to buy at or below a specified price or to
sell at or above a specified price
- If price limits are not met, order is not filled
 Market order – to be executed at any price within the
upper and lower limit.
- Orders to buy or sell stock at best price
available when order is placed
- Fastest way to fill order
How to Buy & Sell Shares
How to Buy & Sell Shares on Bursa Malaysia?
Transaction Costs
 Brokerage Rates
 Clearing Fee
 Stamp Duty
 Registration Fee
Minimum Bids
 Allowed changes offered to the purchased price if it is
more than the trading price
Market price of shares
< than RM1.00
RM1.00 to RM 2.99
RM3.00 to RM 4.98
RM5.00 to RM 9.95
RM10.00 to RM 24.90
RM25.00 to RM 99.75
> than RM 100.00
Minimum bids
½ cents
1 cents
2 cents
5 cents
10 cents
25 cents
50 cents
Clearing and Settlement
 Securities Clearing Automated Network Service Sdn
Bhd (SCANS) offered clearing service to the stock
broking company
 Clearing system of T+3.
 Force Buying: force buying automatically will be done
to the brokerage firm who failed to pay the purchase
price on the third (3) trading day of the contract date.
 Force Selling: If the buyer failed to pay for the
securities bought before 12.30 pm on the third (3)
trading day after the contract date, force selling will be
done on the fourth (4) day of that contract date.
Basic Types of Transactions
 Long Purchase
 a transaction (on a cash basis) in which investors buy
securities in the hope that they will increase in value and
can be sold at a later date for profit
 E.g.: Maybank currently sell at RM11.00 per share, and
will expect to be increased in value over the next few
years. On your analysis, you expect the stock price to rise
to RM20 per share. You place an order and buy 100 shares
of Maybank for RM11 per share. If the share price rises to,
say RM20 per share, you will get profit from your long
purchase. If it drops below RM11 per share, you will
experience a loss on the transactions.
 Margin Trading
 is where borrowed funds were used partly to buy shares
 E.g.: Anita wishes to buy the shares of TNB, which is
currently selling for RM9 per share. Assuming the
margin requirement is 60%, thus Anita has to put up:
Equity contribution 60% x RM 9 x 1,000 shares = RM 5,400
Borrowed fund
40% x RM 9 x 1,000 shares = RM 3,600
RM 9,000
 Contra Transaction
 the buyer paid the broker or the broker paid the buyer
on the different price between buying and selling price.
 Short Selling
 First, you sell and then you buy the shares. A short sale
allows investors to profit from a decline in a security’s
price
 Eg: Suppose you are bearish (pessimistic) on TNB stock,
and its market price is RM10 per share. You tell your
broker to sell short 1,000 shares. The broker borrows
1,000 shares either from another customer account’s or
from another broker. The RM 10,000 cash proceeds from
the short sale are credited to your account
Snapshot of Market
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Kuala Lumpur Composite Index
 Introduced in 1986. It is a value weighted index
 Composite Index
 EMAS Index
 Second Board Index
 Industrial Index