Hurdles – and – hopes of buying KL stocks

Hurdles – and – hopes of buying KL stocks

Tuesday, Dec 10, 2013

Jonathan Kwok

The Straits Times

Most Singaporeans know Malaysia only as a place for good shopping but for a long time I’ve felt that I should shop for shares there too. The growth story is there: 4 to 6 per cent economic expansion each year is nothing to be sniffed at, and Malaysia has vast natural resources which usually translate into wealth. The country’s growth rate will probably outpace Singapore’s as it lifts millions of people into the middle class.The companies are there too. Top names such as food company Nestle Malaysia, cigarette maker British American Tobacco Malaysia and lenders Maybank and CIMB Group all call Kuala Lumpur their home.

Another plus point: Buying opportunities have been plentiful as Malaysian shares have been volatile for a long time this year, especially before the general election in May.

Compare this with Singapore stock prices which have been artificially inflated by the massive money- printing programme in the United States.

I’m also comfortable with the foreign exchange risk in buying ringgit-denominated stock.

Deterred by custodian fee

The only thing holding me back has been the custodian fee that local brokers charge us for holding our overseas stock.

I don’t mind paying the trading fees as they are a one-off but these holding charges will apply without me doing anything, as long as I keep the stock.

At an average of $2 per counter per month, that’s $24 for a single stock every year – totally not worth it for small investors.

They say the fee will be waived for active traders but that cuts no ice with me, as a “buy-and-hold” investor.

Adding insult to injury, a fee is also charged by the brokers when they handle foreign dividends, and send you a foreign share dividend cheque.

One of the few to do away with this holding charge is Standard Chartered Bank, but unfortunately it does not offer Malaysian shares.

So you can imagine how enthused I was when I was introduced to a Malaysian broker, based in Kuala Lumpur. The broker agreed to open a Central Depository System (CDS) account for me – the Malaysian version of Singapore’s Central Depository (CDP) – which will keep my stocks for me at no charge.

So I asked her to send me the forms, and started to set up my Malaysia trading infrastructure.

It sounded easy at the time but unfortunately my experience over the months showed it to be anything but straightforward, possibly as not many Singaporeans have tried what I did.

Plus I’ve not been able to buy any shares. By the time everything was set up, the Malaysia elections were over and the Kuala Lumpur market had shot up.

Setting up

The first thing I had to do was to set up a Malaysian bank account to link to my brokerage account.

So I took one day of leave to travel to a bank branch in Johor Baru as I had to appear in person to open an account. There, I quickly found out that the bank staff didn’t know what to do with me.

Most of the Singaporeans opening Malaysian bank accounts have bought property there so they have title deeds to support their applications. Other foreigners were working there so they had work permits.

Without these, it is harder for a foreigner to open an account, or so they claimed.

In the end they settled on opening two accounts for me – one normal savings account, plus a premier one with a service charge of RM5 per month unless I put a large amount in the bank.

Obviously I was interested in only the normal savings account but they told me I had to have both.

Then came problem two: I wasn’t prepared to open two accounts and had not brought enough cash. So I had to use a cash advance on my credit card to draw ringgit, racking up more fees in the process.

In hindsight, I probably should have shopped around. I’m sure other Malaysian banks would not have forced me to open the premier account.

But anyway, here I was, stuck with an extra bank account that would charge me the equivalent of the Singapore brokerage’s $2 monthly custodian fee – without me having made any investment at all.

Plus interest and fees were racked on my credit card as I spoke.

Talk about starting on a bad note.

A few months later, I trotted back to Johor Baru to close the premium account, after the minimum period I had to keep it open.

More long rides on the Causeway-traversing SBS bus service 170, more time down the drain.

Next came the issue of moving more money into my account, as my initial deposit was not enough to buy many shares.

I looked all over for ways to move money into a foreign bank account without incurring high fees or unfavourable exchange rates.

Banks were an option, as were the remittance companies at Lucky Plaza and Little India. Eventually I settled on the telegraphic transfer service by Singapore Post. There are definitely better rates out there but by then I was quite tired and there is a SingPost outlet near my office so that was convenient.

I won’t bore you with the other administrative and logistical details, such as transferring cash from the bank account to the brokerage account as well as trying out all the Internet trading and banking systems.

My stockbroker in Malaysia has remained helpful along the way.

But this journey has involved countless forms and numerous overseas phone calls, and I quickly stopped counting how much money and time I was spending on this.

Some time in, I started wondering if it was all worth the effort, just to save $2 per counter per month. Still, I consider myself to have gained a moral victory.

It would have been easier to go through a Singapore broker. But I have remained defiant and taken the road less travelled to avoid paying unnecessary – and perhaps unjustified – fees.

Now the Malaysian market just needs to fall so I can buy shares to make this rigmarole of setting up the accounts worthwhile.

Hopefully my moral victory will eventually become a financial victory too.