Investment

TUTORIAL 8 Consideration
1. WHAT IS THE DIFFERENCE BETWEEN
A TRADING ACCOUNT AND CDS
ACCOUNT?
CDS account: Similar to a bank account except that bank account will
hold your cash whereas CDS hold your shares. Since there is no
physical delivery of shares when you trade in Bursa Malaysia, the CDS
uses a simple book entry system to keep track of the movement of
shares which arise from your trades.

Trading account: The account that you open with your broker. All
your trading will be done via the trading accounts. Generally, the
“balance” in your trading account represents the amount due to/from
you resulted from your trades.
2. YOU CALLED YOU REMISER AND TOLD
HIM TO BUY 10 LOTS OF PUBLIC BANK AT
RM11.51 FOR YOU. HOWEVER, HE TOLD
YOU THAT IT CANNOT BE DONE. WHY?
According to the regulation of Bursa Malaysia, the share price must be
quoted according to the minimum bid. Minimum bids and the related share
prices are as follows:

For shares prices from RM10.00 to RM24.98, the minimum bid is 2 sen. Therefore
you can quote at 11.50 or 11.52 but NOT 11.51.
3. HOW MANY SHARES ARE THERE
IN 100 LOTS? 50 LOTS? 1,000 LOTS?
Each lot is equal to 100 shares.

100 lots X 100 shares = 10,000 shares

50 lots X 100 shares = 5,000 shares

1,000 lots X 100 shares = 100,000 shares

4. WHAT IS THE UPPER LIMIT PRICE FOR A
SHARE WHICH CLOSED AT RM1.30
YESTERDAY ? WHAT IS ITS LOWER LIMIT
PRICE?

Upper limit price = RM1.30 X (1 + 30%) = RM1.69

Lower limit price = RM1.30 X (1-30%) = RM 0.91

5. WHAT IS THE TRADING
HOUR OF BURSA MALAYSIA?

Trading hour: 9am to 12.30pm for morning session & 2.30pm to

5pm for afternoon session.

However, the system will start accepting order during the pre
opening phase at 8.30am for morning session and at 2pm for
afternoon session.
6 IF YOU PURCHASED YOUR SHARES ON
MONDAY, APRIL 13, WHEN IS THE LAST
DAY FOR YOU TO MAKE YOUR PAYMENT?
WHAT WILL HAPPEN IF YOU DIDN’T PAY
BY THE DUE DATE?

Based on T+2, purchases made on Monday will due on Wednesday.

Failure to make the payment on due date will caused a force selling
on your outstanding purchases (selling at whatever the buyer’s
price) and you will have to bear the loss or gain for any differences.
7. IF YOU SOLD YOUR SHARES ON
FRIDAY, APRIL 10, WHEN WILL YOU
BE RECEIVING YOUR SALE
PROCEED?

Based on T+2, your proceeds will be ready 2 market days

after the sales. Therefore, you will be receiving your sales
proceeds on the following Tuesday.
8. THE FOLLOWING COMPUTATION
OF CONTRACT VALUE ARE BASED ON
BROKERAGE COMMISSION OF 0.7%:
a) What is the total contract value for the purchased of 500 lots at RM1.50?

500 lots X 100 shares = 50,000 shares

Amount = 50,000 X RM1.50 = RM75,000
Commission = RM75,000 X 0.7%
Clearing Fees = RM75,000 X 0.03% = RM22.50
Stamp Duty = RM75,000 X 0.1% = RM75
Total Contract Value = 75,000 + 525 + 22.50 + 75 = RM75,622.50
B) WHAT IS THE TOTAL CONTRACT
VALUE FOR THE SALES OF 2,000,000
SHARES AT RM5.25?
Amount = 2,000,000 X RM5.25 = RM10,500,000

Commission = RM10,500,000 X 0.7% = RM73,500

Clearing Fees = RM10,500,000 X 0.03% = RM3,150 (Subject to Maximum

1,000)

Stamp Duty = RM10,500,000 X 0.1% = RM10,500 (Subject to Maximum 200)

Total Contract Value = 10,500,000 – 73,500 – 1,000 - 200 = RM10,425,300

A) CALCULATE THE TOTAL AMOUNT
PAYABLE FOR THIS INVESTMENT.

Purchase price at market order = RM5.52

Purchase amount: RM5.52 x 10,000 = RM55,200
Brokerage: RM55,200 x 0.6% = RM331.20
Clearing fee: RM55,200 x 0.03% = RM16.56
Stamp duty: RM55,200 x 0.1% = 55.20 = RM56 .
Amount payable RM55,603.76
(a) (i) Identify when is the amount in part a) above due,
assuming that there is no public holiday in the month of
August 2012.
Amount is due T+2. Therefore it will be due on 8 th August 2012.

(a) (ii) Illustrate what may happen if you fail to pay on the due
date.
If you fails to make the payment on due date, your share will be force
sale (i.e. selling at whatever the buyer’s price) and you will have to bear
the losses or gain for any differences.
(B) IF YOU SELL THE SHARES 1 YEAR LATER
AT RM5.30 PER SHARE, COMPUTE THE TOTAL
AMOUNT YOU WILL RECEIVE FROM THIS
SALE.
Sales amount: RM5.30 x 10,000 = RM53,000
Brokerage: RM53,000 x 0.6% = RM318
Clearing fee: RM53,000 x 0.03% = RM15.90
Stamp duty: RM53,000 x 0.1% = 53.00 = RM53 .
Amount receivable RM52,613.10
 (C) COMPUTE THE TOTAL RETURN (IN
PERCENTAGE), TAKING INTO CONSIDERATION
ALL THE TRANSACTION COST, AND ASSUMING
RM0.50 PER SHARE DIVIDENDS ARE COLLECTED
DURING YOUR 1 YEAR HOLDING PERIOD .

Dividend received = RM0.50 x 10,000 = RM5,000

TR = [5000 + (52,613.10 – 55,603.76)] / 55,603.76 = 3.61%