How to be a Successful Investor in Malaysia

Here is a guide on how to be a successful investor in Malaysia. If you are a beginner, you must read this guide before you start your investing journey.

In any business, buying low and selling high is important. Stock market trading is no different. 

No matter if you are in as a short term trader or a longer term investor, it all boils down to 6 simple questions you should ask and answer to yourself - Why, What, Where, Who, How and When.

What do you want to achieve from the stock market?

Why buy a stock?

Where to get relevant information on a stock?

Who should you trust for reliable information?

How can you obtain the information? And lastly

When should you buy and Why should you sell a stock?

What are you doing here?

Firstly, if you are new to the stock market, then asking yourself what you want from the stock market will be a good idea. Are you chasing for short term profits? Or do you just want to place your money somewhere so that you can receive a steady stream of income? Or are you here just because your friend told you to? Either way, it is your hard earn cash at stake, so being vigilant at all times is advisable.

Why seek for information?

It is always good to know as many companies as possible or at least a basic idea about them and what do they do so that you will be able to react immediately when an opportunity arises.

Knowing and understanding the latest current economy trend cycle gives you the edge in making your judgement on whether a stock is overvalued or undervalued. Economy plays a big role in demand and consumption pattern and ultimately affects the company’s sales and profit.

What information to look at and understand?

Getting ahead of others is crucial and this can be done by looking at the latest information publicly available from sources such as company announcements, newspaper articles, corporate websites, analyst reports, investor forums etc. But not all information should be taken as positive and a rational and skeptical approach is encouraged.

Company announcements will be most reliable as they are regulated by the Securities Commission. Companies have a stipulated time frame as well as a set of required information to be announced whenever an event warrants an announcement.

Examples of such events include quarterly results, merger proposals, corporate proposals and other significant transactions. These announcements can be obtained at Bursa Malaysia official website.

Research analysts are trained professionals (most of them are Certified Financial Analysts) and they often meet and maintain contacts with key personnel of the companies they research on, so their opinions are at least more reliable than retail investors. Do note that research reports issued by some major reputable research houses may have an impact on the stock prices, but many may not necessary be the case.

For beginners, stick to reading newspaper articles and analyst reports will be your best bet. They have a reputation to keep and chances are they will be reliable. However, you must take note that some newspaper articles may include rumours or market talks. This type of information should be read with highest caution.

You should be extra cautious about market rumours regarding takeovers, mergers and acquisition as well as other corporate exercise that involves large off-market transactions and deals. You should exercise rational thoughts especially on whether the deal makes business sense and whether the stock really worth what it is.

Relevant information is the latest information available and closely related to the stock that it will most likely affect the stock price. Your professional Investment Advisor will be able to assist you on seeking relevant information. However, searching for relevant information may prove difficult for others.

When should you buy and why should you sell a stock?

Lastly, timing is the final key to being a successful investor. Buying at the lowest price and selling at the highest is ideal. While this is possible, more often than not it won’t happen. What you can do is to read and understand as much relevant information from reliable sources as possible and make your own judgement on when to buy and when to sell stocks.

Added on 10 May 2012-

Political news and sentiment

Political developments often result in radical change in sentiments of the Malaysian stock market. This is unfortunate because there is no way we can influence in any political decisions.

We can neither lobby or change any political decisions nor can we predict their future developments. For instance, back in 2008, the petrol and electricity prices hike dramatically within a day. Companies were shaken by this decision and stock prices reacted with haste.

The good news is the market activity and momentum is usually maintained by local institutional investors and this usually provides a certain level of stability.

More prominent Government linked institutional funds include Employees’ Provident Funds (EPF), Tabung Haji Lembaga Angkatan Tentera (LTAT), Kumpulan Wang Persaraan (KWAP) and Skim Amanah Saham Bumiputera. 

The funds actively trade in the Malaysia’s stock exchange to drive momentum and direction of the market. Apart from market making role, these funds are usually substantial shareholders in the stocks they invest in.

As of December 2011, EPF has RM 469.2 Billion in total assets under management and is the largest local institutional fund under management in Malaysia. If you would like to view EPF's top 30 shareholdings just click on the link EPF's List Of Top 30 Equity Investments Listed On Bursa Malaysia As At 31 March 2012. Meanwhile, KWAP has RM 82.61 Billion as of 1st Quarter 2012.

Investors in Malaysia usually look out for major shareholdings changes involving these institutions that will influence their decision on which stock to purchase or sell. They have a strong holding power form ample fund liquidity as well as access to professional research and training team so most of the time they will profit from their transactions.

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This guide is not final and additional points will be added and updated from time to time, so bookmark this page and subscribe to us for the latest updates.

Please do read the disclaimer statement and post a comment below if you have any ideas to share.

I hope the information is useful for you.