How GST affecting our Share investment?

This is another topic on GST awareness. This time we talk about share market investment, your share trading account and transaction costs. Every share investor should read this article. Let's start here...

Many share investors already started their "wait and see" approach since last week because many of us don't know how GST is going to impact our share investment after 1st April 2015.

Basically, each transaction consists of the following 3 types of charges:

1. Brokerage fee
   Normally, the charge is 0.42% (online trading) and 0.60% (offline trading). Some of you may find it to be as low as 0.10% (intraday trading). Yes, this fee is subject to 6% GST. After 1st April, it will become 0.4452% (online trading) and 0.636% (offline trading).
   
   
2. Clearing fee
   This fee is basically charged by Bursa Malaysia and it was fixed at 0.03% of the transaction amount. Yes, this fee is also subject to 6% GST and it will become 0.0318% after this.
   
   
3. Stamp Duty
   This is calculated as RM1 stamp duty for every RM1,000 trading value. Since this is another form of tax by government, stamp duty is NOT subject to GST. Remained unchanged.

In order to have a clearer picture, let's take an example of a 1,000 share of Maybank RM9.25 currently. The total trading value will be RM9,250.

• Before 1st April, the total cost will be
• Brokerage fee 0.42% = RM38.85
• Clearing fee 0.03% = RM2.775
• Stamp duty = RM10
• Total transaction cost = RM51.625

• After 1st April, the total cost will be
• Brokerage fee 0.4452% = RM41.181
• Clearing fee 0.0318% = RM2.9415
• Stamp duty = RM10
• Total transaction cost = RM54.1225

• So, the different for this example before and after GST is around RM2.50 and in terms of percentage, it's just a mere 4.8% more.

Then, how about capital gains from share investment?

Many investors sold their holdings before 1st April, thinking that any profit earned from share trading will subject to 6% GST. This is not the case. As usual, any capital gains from share trading in Malaysia are not subject to any tax including GST. Meaning, capital gains will remained as tax-free. No need to panic selling.

How about share dividend payout?

For dividend, it will remained the same unless you are using a nominee CDS account, in which there might be some administration fees involved that will be subjecting to 6% GST charge. Better switch to direct CDS account if you want to avoid these charges.

Conclusion

Yes, GST definitely will impact the overall share trading market, but the sentiment will be faded away very fast due to its minimal impact. GST aside, it's the emotional impact of the economy that will dampen our share investment. Happy trading !!!

Share Trading: Nominee vs Direct CDS account

Did you ever notice that when you open a share trading account with a broker, they will usually ask you whether you prefers nominee or direct CDS account? For an ordinary investor, we might not really understand what are the differences and benefits that you can enjoy for both types of CDS (Central Depository System) account.

Well, this is the very basic step every share trading investors should find out first, before approaching a share broker. Equipping yourself with the relevant basic knowledge in order to avoid starting at the wrong footstep. Agree?

This article may help you to understand the differences between these two type of account. Please refer to below comparison tables:

Account Opening Stage

How about the Trading Fees?Generally, the charges are the same for both accounts. Whereby, the normal brokerage fee is 0.42% per transaction with minimum RM12 for online transaction or minimum RM40 for offline transaction. Meanwhile, the clearing fee is 0.03% per transaction and stamp duty of RM1 per RM1,000 contract value.

How about Collateral Limit?

For those account which gave you some trading limit based on how much collateral you pledged into your trading account. Collateral such as cash and shares would give you a limit of 2-3 times of the total value pledged. This is good for those traders who want some flexibility, so that he/she still can buy shares although he/she don't has so much cash inside their trading account yet. Of course, investors need to settle the outstanding amount within T+3 trading days.

After Trading Stage

By comparing both account, share investor who owns a Direct Account can enjoy better savings on the "after trading" charges. However ,the main advantage that a Nominees Account holder can enjoy is the service of a share broker. The paperwork of corporate actions sometimes is very hard for investors to understand and make decision. And, many investors might missed out in replying those corporate actions if they were a direct account holder. If you're a nominee account holder, please make full use of your nominee charges. In summary, there is advantages and disadvantages to both accounts.

PS: All Margin/Pledge /Foreign Trading accounts are treated as Nominees CDS account.

This is a guest post contributed by Martin Heng Sin Soon, an Equity Dealer with RHB Investment Bank. You can open both nominee and direct account with him. He can be reached via email heng.sin.soon@rhbgroup.com.my