Types of Securities in Bursa Malaysia

These securities represent different types of investments with varying risk and reward profiles. Some of the most common types of securities traded on Bursa Malaysia include:

Shares

Shares, also known as stocks, represent undivided ownership in a company. When you purchase a share, you become a part-owner of the company. There are two main types of shares:

Common Shares

• Basic ownership: Common shareholders have the right to vote on company matters, such as electing directors and approving major decisions.
• Dividend payments: They are entitled to receive dividends, if any, distributed by the company's profits.
• Residual claim: In case of liquidation, common shareholders have a residual claim on the company's assets after all debts and preferred shareholders have been paid.

Preferred Shares

• Prioritized rights: Preferred shareholders have priority over common shareholders in terms of dividend payments and asset distribution in case of liquidation.
• Fixed dividends: They typically receive a fixed dividend rate, regardless of the company's profitability.
• No voting rights: Preferred shareholders generally do not have voting rights.

Warrants

What are Warrants?

Warrants are like options that give you the right, but not the obligation, to buy or sell something at a specific price within a certain timeframe. There are two main types:

• Company Warrants: Issued directly by the company, these give you the right to buy new shares of that company at a predetermined price.
• Structured Warrants: Issued by a third-party, these give you the right to buy or sell an underlying asset (like a stock, ETF, or index) at a fixed price.

Shariah Compliance

Company warrants are considered Shariah-compliant if the underlying shares are also Shariah-compliant.

Types of Structured Warrants

• Call Warrants: These let you buy the underlying asset at a specific price.
• Put Warrants: These let you sell the underlying asset at a specific price.
• Callable Bull/Bear Certificates (CBBC): These track the performance of an underlying stock without needing to own the actual stock. You can bet on the stock going up (Bull) or down (Bear).

Exchange-Traded Funds (ETFs)

What is an ETF?

An ETF, or Exchange-Traded Fund, is like a basket of investments that tracks the performance of something specific, like an index, a commodity, or even a group of stocks. It's a way to invest in a variety of assets without having to buy each one individually.

Why Choose ETFs?

• Low cost: ETFs typically have lower fees compared to traditional mutual funds.
• Diversification: Investing in an ETF allows you to spread your risk across multiple assets.
• Wide range of choices: Bursa Malaysia offers ETFs covering various regions, asset classes, and investment strategies.

How do ETFs work?

ETFs trade on the stock exchange, just like stocks. This means you can buy or sell them throughout the trading day. They combine the features of a unit trust (a pooled investment fund) and a stock, giving you the best of both worlds.

Shariah-Compliant ETFs

Yes, there are Shariah-compliant ETFs in Bursa Malaysia. These are called i-ETFs. To be Shariah-compliant, the ETF must track an index that only includes securities that meet specific Islamic guidelines.

REITs

What are REITs?

REITs, or Real Estate Investment Trusts, are a type of investment fund that specializes in owning and operating income-producing real estate properties. They offer investors a way to invest in real estate without having to buy physical properties themselves.

Why Choose REITs?

• Affordability: REITs are much more affordable than buying physical real estate.
• Liquidity: REITs are traded on the stock exchange, making them easier to buy and sell compared to physical properties.
• Stable income: REITs typically distribute a portion of their rental income to investors, providing a steady stream of income.
• Professional management: REITs are managed by experienced professionals who handle property management tasks.
• Exposure to large-scale real estate: REITs allow you to invest in high-quality commercial real estate without having to purchase entire properties.

How do REITs work?

To be listed on Bursa Malaysia, REITs must comply with specific guidelines set by the Securities Commission. This ensures that they meet certain standards of transparency and financial health.

Bursa Malaysia Index Series

A Joint Venture with FTSE Group

In 2006, Bursa Malaysia partnered with FTSE Group to create a comprehensive set of indices that measure the performance of various segments of the Malaysian and regional markets. These indices provide investors with valuable insights into the performance of listed companies.

Eligibility Criteria and Index Methodology

All Malaysian companies listed on the Main Market and ACE Market are eligible for inclusion in the indices, subject to meeting FTSE's stringent standards for free float, liquidity, and investability. The index methodology is designed to allow for cross-border analysis and comparison, providing investors with a clear picture of market trends.

Index Coverage and Benefits

The index series covers all stock sizes within the market, offering investors a broader range of investment opportunities. These indices can be used to benchmark investments, create various financial products, and track the performance of specific market segments.

Shariah Indices

To cater to investors seeking Shariah-compliant investments, Bursa Malaysia and FTSE Russell have launched Shariah indices. These indices track the performance of Shariah-compliant securities and are used for benchmarking, product creation, and investment tracking.

Conclusion

Bursa Malaysia offers a diverse range of securities to suit various investment objectives and risk tolerances. From shares representing ownership in companies to warrants providing options for future purchases or sales, investors have a variety of choices.

Shariah-compliant securities are also available for those seeking investments that adhere to Islamic principles. Exchange-Traded Funds (ETFs) offer a convenient and diversified way to invest in a basket of assets, while Real Estate Investment Trusts (REITs) provide exposure to the real estate market without the need for direct property ownership.

Finally, the Bursa Malaysia index series offers a comprehensive set of indices to track market performance and facilitate investment analysis. By understanding these different types of securities and their characteristics, investors can make informed decisions and build a well-structured investment portfolio tailored to their individual goals.