Choosing a brokerage to open a stock trading account can be quite a daunting task for beginners. Don’t you agree? These questions might thwart your from making your first move. “How do I start investing in the stock market?” “How do I open a stock trading account in Malaysia?”
Today, I’m going to share with you the COMPLETE guide to opening a stock trading account in Malaysia.
Before you can buy or sell any stock listed on Bursa Malaysia Stock Exchange, you need to have two accounts.
A stock trading account and a Central Depository System (CDS) account.
What is a Central Depository System (CDS) Account?
A CDS account records your ownership of the securities and the transaction history whenever you buy and sell them. It’s like an electronic safe box to keep your shares.
You can open only one CDS account with each brokerage.
For example, if you open two stock trading accounts through Maybank and Public Bank respectively, you’ll have two CDS accounts.
Bursa Malaysia Depository maintains and operates all CDS accounts in Malaysia. You’ll receive a monthly account statement if there’s any transaction made in your CDS account during the preceding month.
There are two types of CDS account – Direct CDS and Nominee CDS accounts.
What’s the difference between Direct CDS and Nominee CDS accounts?
Depending on your preference, you can request the broker to open either a Direct or Nominee CDS account.
The fee for opening a CDS account is RM10.
Who can open a CDS account?
Anyone who is at least 18 years old is eligible to open a CDS account.
How to open a CDS account?
You can open a CDS account through any brokerage in Malaysia.
Generally, the brokerage firms will help you open a CDS account simultaneously when you register for a stock trading account.
You can refer to the FAQs on CDS account if you have further questions.
4 Key Things to Consider Before Opening a Stock Trading Account in Malaysia
You can only trade shares through a broker using a stock trading account.
Therefore, it’s important to choose a brokerage that best suits your needs before opening a stock trading account.
There are a few important factors to consider when you choose a brokerage. Let’s dive right in.
1. Brokerage Fees
A brokerage charges you a fee for executing the transactions whenever you buy or sell shares. It forms part of the transaction costs to invest in the stock market.
There’s a significant difference in the fees charged between different brokerages in Malaysia.
More often than not, retail investors tend to overlook the importance of the brokerage fees. Depending on the frequency and amount of trades, brokerage fees might reduce your investment yield significantly in the long run.
Let’s say you’re using a stock trading account with Maybank that charges a brokerage fee of 0.42% on the invested amount.
The share price needs to go up by approximately 0.84% before it can breakeven. That’s because it’s a two-way transaction. You need to pay brokerage fees when you buy and sell the shares.
It may not as obvious for the value investors who tend to hold shares for a long investment horizon.
Unfortunately, the same cannot be said for those who trade frequently.
To put it into perspective, if you trade the same stock for ten times in a year, the breakeven point is 4.2%, a multiplier of 10. It makes a huge difference if you’re using a stock trading account that charges only 0.10% brokerage fee.
The difference is 1% versus 4.2%!
That’s why it’s important to consider the difference in brokerage fees before choosing a brokerage to open your stock trading account.
2. Cash Upfront or Margin Account
Next, consider whether you need a cash upfront or margin trading account.
With a cash upfront account, you need to deposit money into the account first before buying any shares.
A cash upfront account only allows you to buy shares based on available cash that you’ve deposited upfront. It typically charges you a lower brokerage fee for trading shares.
On the other hand, a margin account allows you to buy shares with a higher value than the available cash. Your trading limit is determined based on the available cash and shares pledged with the broker.
In other words, you’re borrowing money from the broker to buy more shares using a margin account.
When you buy shares on margin, your profit will be amplified when the share price goes up. So do the losses when the share price goes down.
Buying shares on margin is extremely risky due to margin call potentially triggers when the share price stumbles unexpectedly.
A margin call occurs when the broker demands you to deposit more money into the margin account to maintain the minimum maintenance margin in the event of a
Let’s say investor ABC buys Company XYZ’s shares worth RM50,000 using RM25,000 available cash and remaining on margin.
The broker requires the investor to maintain a minimum maintenance margin of 25% for the account.
Investor ABC’s equity portion on day 1 is 50% (RM50,000 market value of shares – RM25,000 borrowed funds) / RM50,000 market value of shares.
The minimum maintenance margin is calculated based on 25% * the market value of the portfolio.
Imagine after 6 months, Company XYZ’s share price declines sharply and the shares are now worth only RM30,000. The minimum maintenance margin is RM7,500 (25% * RM30,000).
Investor ABC’s equity portion drops to RM5,000 only (Market value of shares RM30,000 minus RM25,000 borrowed funds).
Consequently, the investor needs to deposit additional RM2,500 into the account to achieve the minimum maintenance margin.
What happens if investor ABC fails to top up RM2,500 into the account?
The broker has the right to sell the shares in the account immediately to make sure it meets the minimum maintenance margin.
As a result, the investor will lose money instantly although the decline in share price could be just temporary.
In my humble opinion, always choose a cash upfront account when you just get started with investing in the stock market.
Stay away from margin account and only buy whatever you can afford. It’s okay to start slow and steady to learn the ropes as a beginner.
3. Market accessibility
There are limited brokerages that offer the facility to buy foreign shares listed on stock exchanges in other countries.
A foreign share trading account allows you to buy shares through stock exchanges in U.S., Singapore, Hong Kong, London, etc. The brokerage fee is typically different from trading local shares.
Whether you need a local or foreign share trading account depends very much on your needs.
If you’re just started out as a beginner, it’s advisable to open a local share trading account. Keep things simple and make yourself comfortable first.
Don’t get bogged down with so many complicated stuff at once. It’s very convenient to get a foreign share trading account when you need it in the
4. Ease of opening an account
Last but not least is the ease of opening a share trading account. You may be surprised that this may be the deal breaker for most millennial investors.
You may have realised that traditional businesses have evolved over time and employed cutting-edge technology to improve convenience and time-saving. The success of new business models lies in these two factors like how Grab makes people’s lives easier.
Rather than saying the younger generation procrastinates, they prefer doing things in a more convenient and efficient manner.
It seems impossible to make them drag their feet to visit an investment bank and go through all the paperwork if there’s a way to open a share trading account with just a few clicks online.
The good news is that there are a few brokers that allow you to open a share trading account completely online. Yet the process is simple and straightforward. And the brokerage fees are very competitive as well.
5 Key Reasons Why I Choose Rakuten Trade as My Preferred Broker
Who is Rakuten Trade?
Rakuten Trade is a joint venture between Malaysia’s Kenanga Investment Bank Berhad and Japan’s Rakuten Securities, Inc. It holds a restricted Capital Markets Services License (
1. Lowest Brokerage Fee
The more than obvious reason why Rakuten Trade is my preferred broker is because it offers among Malaysia’s lowest brokerage fees.
As what I’ve mentioned earlier, brokerage fees can make a huge difference in your investment yield over time.
2. Account Opening is Easier Than Ever
Rakuten Trade is also the first in Malaysia that offers online account opening. It takes me less than 15 minutes to register for a share trading account.
The best part is that your application will be processed within two hours on the same day. And you can start trading immediately after your account has been activated.
3. Account Management is Hassle-free
Rakuten Trade offers only Nominee CDS account. But that’s exactly why I like it.
You don’t have to worry about any paperwork.
With a Nominee CDS account, all corporate action exercises like right issues, warrants conversion and what not are all handled by Rakuten Trade.
The best part is it doesn’t charge you for the administrative tasks,
Yes, a hardcopy annual report will not arrive at your doorstep. But who cares?
Annual report for a listed company is downloadable with just a click of a few buttons! So long the dividends will still be credited into my trading account, it’s all good.
4. Educational Support
Besides, Rakuten Trade also provides a lot of educational videos and webinars on stock investing guides for the investors. It’s really helpful especially for the beginners who are new to investing in the
5. Other Benefits
Rakuten Trade also has a loyalty point program. It’s not a deal breaker but who doesn’t grab whatever that’s free?
You’ll get 2,000 points once you’ve made a trade within 30 days after account activation. You’ll also get 1 point for each RM2 brokerage fee you incur when buying or selling shares.
Besides, Rakuten Trade also rewards you with 500 points when you’ve successfully referred a friend to sign up and trade.
Plus, now you can also choose one of the following rewards for each account you open.
- Receive RM40 off on your next Lazada purchase.
- Sign up to earn 800 AirAsia BIG Points.
- Receive RM10 off X 3 GrabCar rides.
- Collect 1,000 BonusLink points.
Refer to Rakuten Trade’s website for further details.
If you’re interested to get a share trading account through Rakuten Trade, you can always use this referral link. Click here to sign up.
You can convert the loyalty points either into AirAsia Big, B Infinite and/or BonusLink points.
Are you ready?
Sweet. Click here to sign up now.
Once you’ve clicked on the referral link above, you will be directed to the following page. Firstly, key-in your name and NRIC number. For non-Malaysians, you can key-in your passport number and the expiry date.
Next, upload your NRIC/Passport front and back images. Then key-in the following details:
- Contact number
- Email address
- Security questions
After you’ve read the general terms and conditions, you can proceed to the next step.
You have to set a 6-digit trading pin to execute any transaction for buying or selling shares. Key-in your personal particulars as shown in the printscreen below.
Next, update your bank account details and upload a copy of your bank statement.
You can now proceed to the final step. There are a few simple questions which you need to answer for financial profiling purposes.
Once you’ve made the RM10 payment for CDS account opening, check your inbox and verify your email.
Congratulations, it’s all done! Rakuten Trade will notify you through email once your account is approved.
If you are new to stock investing, Real Estate Investment Trust in Malaysia could be the best choice to begin with. And here’s the comprehensive guide that shows you how to choose the best REIT stock in Malaysia.
What other factors do you consider before opening a stock trading account?
Share your thoughts below!