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Interested to invest in an IPO?
Interested to invest in an IPO?
Before a company is publicly listed, many considerations are taken into account to ensure that it can raise the most capital for its business. Stringent guidelines and evaluation processes boost investors' confidence to consider IPO as a reasonable investment opportunity. Due to that, investors with interest will expect to gain a higher return from subscribing to the IPO. Since an IPO is usually sold at a discounted price, it makes the issuance more attractive, generating a higher demand from retail investors. A common perception is that when a company's growth prospect is high, investors become more interested in getting their hands on the shares for the first time.
Nevertheless, investing in IPO would require a little bit more than just interest and joining the bandwagon. Besides analysing the fundamentals and technicals of an IPO issuance, newcomers can find it challenging to answer, "how do I start subscribing?". Thus, it is safe to say that investors should be aware of the tools needed and steps to be taken to start subscribing for an IPO.
How to start?
To trade in Malaysia, investors have to open two (2) accounts;
CDS account and trading account with a brokerage
1. Open a Central Depository System (CDS) account
CDS is an acronym for "Central Depository System". CDS is a system that is fully owned and operated by Bursa Malaysia Depository Sdn Bhd (formerly known as Malaysian Central Depository Sdn. Bhd.), a wholly-owned subsidiary of Bursa Malaysia Berhad.
Investors wishing to trade in securities listed on Bursa Malaysia must open CDS accounts with Authorised Depository Agents (ADAs), i.e. stockbroking companies. Securities bought will be credited into CDS accounts that the investors have opened. Likewise, for securities sold, these securities will be debited from the CDS accounts. The CDS account is maintained by Bursa Malaysia directly and has no links to the brokerages.
What are the requirements to open a CDS account?
i) Identity card (I/C)
ii) Payslip or latest bank statement
iii) Fees RM10.00
How to register?
iii) Walk-in to an investment bank
2. Open a trading account with a brokerage
Investors can go to any investment bank in Malaysia to open a trading account. Be noted that there will be a brokerage fee that investors have to pay to the investment bank. To highlight, Investors do not need to have an existing account with any banks before opening a share trading account because the trading account can be linked to a local savings account from other banks. Some of the investments banks are:
Brokerage fee (min)
RM8.88
RM8
RM12
RM14
RM5
RM12
RM8
RM12
RM8
RM8
What's next?
After investors have opened a Direct CDS account and a trading account with a brokerage, they can start investing in an IPO. The three (3) ways available for an IPO application are the White Application Forms, Electronic Share Application or online. Under the law, investors are eligible to make only one share IPO application.
White Application Form
The White Application Form is a traditional way of applying for an IPO. Investors can easily acquire the form from issuing houses, stockbroking companies, and financial institutions.
Critical steps to apply using the White Application Form:
i) Fill in the application form. Investors must ensure that the personal details are accurately filled in.
ii) Along with the application form, investors must submit the banker's order payment slip for the number of shares applied for an IPO.
iii) Submit the completed application form directly to the issuing house or via postal mail.
Electronic Share Application (ESA)
To apply for an IPO using ESA requires the investors to have a savings account in any participating financial institutions (banks) offering IPO applications. Besides following the instructions at the ATM, investors must have;
i) ATM card that is linked to their CDS account,
ii) PIN,
iii) CDS account number,
iv) and IPO stock code.
Once application is completed, the printed ATM slip should be retained for investors' records and references.
Online
The online application is relatively a new venture for the Malaysian IPO market. Applying for an IPO no longer requires investors to attend at the venues physically, but at the comfort of one's own home. The online application is done through the financial institutions' own website whereby certain eligibility criteria must be fulfilled.
Criteria to apply online:
i) Applicants must be at least 18 years old,
ii) A Malaysian citizen,
iii) Possess a Direct CDS account,
iv) Must not be related (directly or indirectly) to the issuing house,
v) and a subscription of at least 100 IPO shares (or multiples of 100).
IPO Buying Process - Trading Platform View
Investors are able to click on the desired issuer to view the e-IPO summary and to apply for an IPO from their trading account. Some views of a trading account and steps for IPO subscription are provided here:
Note: Different agents may have different trading platform view.
Step 1:
Step 1:
For IPO subscription, you may choose "eIPO" from the home page of your trading account.
Note: "Trading hall" will direct you to the secondary market trading platform for trading activities of all active shares listed in Bursa Malaysia.
Step 2:
Step 2:
Once logged into your trading account, your may click on "IPOs" to view the new and upcoming IPOs scheduled for listing in Bursa Malaysia.
Step 3:
Step 3:
Click on "Historical IPOs" to view the list of currently or historically issued IPOs in Bursa Malaysia.
You may also find the prospectus (in pdf) attached to each issuer.
Step 4:
Step 4:
Click on any IPO (or issuer name) to view its offering statistics, information and start subscribing to the IPO before the closing of the application date.
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