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Time to Trade: of Exemptions and Short Selling

In the recent World Capital Markets Symposium, hosted by the Securities Commission Malaysia, several announcements were made by the Prime Minister, YAB Najib Razak for the betterment of the Malaysian market. There were several announcements made, but today we are highlighting three important points that we believe would benefit both the market and investors.

First off, effective 1st of March 2018 for a period of three years, traders and investors trading on mid-small (MIDS) cap companies will be exempted from stamp duty payment. With the implementation of this, it would provide you a better leverage for your trading, both maximizing profits and minimizing losses.

Before we go further, how do we actually classify if a stock is in the MIDS cap?

We are definitely looking at market capitalization here, a stock that falls in the MIDS category would be ranging from RM200 million to RM2 billion as of 31st December 2017. A little check at the official Bursa Malaysia site would show you a list of over 300 counters that are classified as a MIDS cap stock (click here for the full list). The list would be based on the 31st December of the previous year (i.e: 2018 would use 31st December 2017 list of MIDS stock).

Bursa MIDS List

But how would this benefit you? Let’s do some calculation.

Assuming you bought stocks worth RM10,000, the stamping fees would be at RM10 (0.1% rounded up). Let’s say that you purchase and sell weekly, which would be approximately RM80,000 worth of trading value (assuming 4 weeks a month). This goes to RM80 of stamp duty a month. This would bring you a saving of RM960 a year! Imagine if you were an active trader with a huge fund size, it would possibly provide you savings up to RM10,000.  As it goes on for 3 years, you would save up to nearly RM30,000 with this computation.

Many day traders have criticized the inability to capture the opportunity during a bearish market condition. Therefore, this has caused traders to move to derivatives market which they are less familiar with the mechanism of trading, which in return leads to losses. Trading in the derivatives market would be like a double-edged sword, you either go big or go home!

Why are we talking about derivatives, you say?

Let’s come back to Bursa Malaysia, in the same World Capital Markets Symposium, the PM announced the Intraday Short Selling (IDSS), which will be allowed to investors from as early as the second quarter of 2018.  That’s a month away from the writing of this article! This would be able to provide more opportunities for traders as it provides a more efficient market, providing a chance to trade in both the bearish and bullish market. (Do tune in for more on IDSS soon!)

To further enhance the market and attract new investors & traders, YAB Najib Razak announced an exemption on clearance fees (0.03%) for those who are new in the market. The criteria would be that the individual has to be new to the market. This is eligible to those who have never opened a direct CDS account before with any PO. Those with Nominees account and have never set up a direct CDS account are also eligible! (You know who you are 😉 ). This will be effective 1st March 2018 for 6 months.

Here’s an example

An individual setting up his first trading account (CDS) with M+ Online on the 2nd of March 2018, with an initial capital of RM10,000. As a standard, an individual is required to pay 3 different charges, which are Brokerage fees, Stamping fees & Clearance fees. While the Brokerage fees vary based on different brokers, clearance and stamping are fixed at 0.03% (exclusive GST) and 0.1%(rounded up) respectively.

So, a new account holder with M+ Online opening his first trading account (CDS) only has to pay for brokerage when he trades the 300 over counters in the MIDS range! So, what are you waiting for? Get your account opened from today onwards to enjoy the waiver!

For more info: Bursamktplc

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