Trading platform lets Singapore users invest in fractions of a stock listed on Bursa Malaysia

SINGAPORE – Like Singapore markets, Malaysia equities have attracted investor interest in 2024.

As at Nov 20, the Kuala Lumpur Composite Index (KLCI), which tracks the 30 biggest companies on the Bursa Malaysia mainboard, has risen nearly 10 per cent since the beginning of the year to 1,598.18. Singapore’s Straits Times Index rose by 15.5 per cent over the same period.

Riding on this positive mood in Malaysian stocks, CGS International Securities on Nov 18 launched UP, which it touts as the first trading platform in the region that allows users to invest in fractional shares of stocks listed on Bursa Malaysia.

The platform will offer a group of large-cap stocks on the KLCI, said Mr Elgin Ting, group head of strategic partnerships at CGS International, adding that investors will now have more options with fractionalised shares.

The stocks include conglomerate YTL, which has businesses in construction, power generation and transmission, and hotel development and management; Public Bank; Malayan Banking; electricity company Tenaga Nasional; IHH Healthcare; and telco CelcomDigi.

CGS International acts as a nominee, holding the full share on behalf of investors and allowing them to trade fractions of it. This enables smaller investments in high-priced stocks.

The UP – Live UP, Invest Up app can be downloaded on Google Play and Apple’s app store.

It is targeted at investors who have little to no experience in trading, and is regulated under Singapore rules, Mr Ting said.

Singapore citizens, permanent residents and those holding employment passes can open a trading account on it.

There is no minimum investment amount, and the platform fee is 50 Malaysian sen (15 Singapore cents). Commission for a trade size of less than 100 shares is RM2.50, or 0.06 per cent of the trade value for larger transactions.

Mr Ting said interest in Malaysia has picked up tremendously, as its economy is picking up and the country has bilateral initiatives with Singapore.

Some of the initiatives are the

Johor Bahru-Singapore Rapid Transit System Link

and the

Johor-Singapore Special Economic Zone

agreement set to be signed in December.

Mr Yujun Lin, chief executive of trading platform Interactive Brokers Singapore, agreed that there is more interest in Malaysian stocks as the nation’s economy, foreign investments and stock markets continue to grow. 

Bursa Malaysia is one of the more than 150 global markets – which include the US, Britain, Germany, Hong Kong, Singapore and Japan – that Interactive Brokers clients can trade in. 

Mr Lin added that there is strong growth potential in the Asia-Pacific and South-east Asia, as the demographic is relatively young and there is a growing middle class.

Singapore residents can trade directly in stocks listed on Bursa Malaysia if they have a Central Depository System (CDS) account with a stockbroking company in Malaysia.

The CDS functions like Singapore’s Central Depository accounts. Any securities that an investor buys or sells will be credited or debited from his CDS account.

Alternatively, Singapore residents who do not have a CDS account can invest in Malaysian stocks via a nominee CDS account. The stocks are held on their behalf by a third party – the broker – under nominee accounts. 

This is similar to how Singapore investors can invest in other overseas markets, such as the US, Hong Kong and China, through nominee accounts with their stockbrokers.

Mr Lin said Interactive Brokers does not currently offer fractional trading for Malaysian stocks, as this is usually more applicable if the stocks have high prices such as Tesla, which trades at more than US$300 per share, he said.

Fractional trading is suitable for investors who want to invest small amounts into a wide selection of stocks for the purposes of diversification, he added.

Likewise, Phillip Securities senior financial services director Louis Koay did not think fractional shares would attract investors in Malaysia or Singapore stocks, as the minimum amount to invest in these shares is usually quite small. 

For instance, to buy a board lot of YTL shares, which are trading around RM2, an investor needs to fork out only RM200. In Malaysia, like in Singapore, shares are traded in board lots of 100 units.

Mr Ting said fractionalisation is suitable for investors who have, say, only $100 to invest. The broker can set up a regular savings plan for these clients, so they can invest a small amount every month and gradually build up their investment portfolio over time.

For the less well-off, even $3,000 is not a small amount, he said.

“This is the main reason that has prevented them from investing,” he said, adding that “by bringing the size down, we can help them to embark on their investment journey”.

Mr Ting added that CGS International plans to offer fractional trading to the rest of the Asean markets.

“We want young investors, new investors to invest in companies they have grown up with and know very well, in small, affordable amounts. We are starting this journey with Malaysia,” he said. 

Older Singapore investors may remember what happened to Clob International (Central Limit Order Book) back in 1998.

The platform allowed Singapore investors to trade in about 180 Malaysian stocks over the counter, but the Malaysian government abruptly declared that this was illegal and ordered all shares to move back to the Kuala Lumpur Stock Exchange.

Mr Ting noted that investors using Clob traded Malaysian stocks on an alternate platform in Singapore, instead of directly into Malaysian securities.

But with UP, the investor accesses the Malaysian market directly, with stock investments kept under the CDS – which is a “very, very different proposition”, he said.

“The risk is no different from an investor buying into Hong Kong or the US markets.”