By YEOW POOI LING
PETALING JAYA: Some retail investors are unhappy over the higher costs in investing in stocks after the minimum brokerage charges are increased by about 233% to RM40 per transaction from the current RM12 effective Jan 1.
In an e-mail to StarBiz, retail investor C. S. Ng said the increase would have a significant impact on small traders who would be discouraged from trading as frequently as before.
In addition, they would also be deterred from dabbling in low-priced shares or trade in small quantities.
Another retail player in his e-mail concurred, saying that based on a brokerage rate of 0.7% per transaction, investors would have to buy shares worth more than RM5,715 each time to avoid being hit with higher broking charges compared with RM1,715 currently.
Furthermore, he said, the charges would make trading in penny stocks unattractive, especially if investors wanted to buy in small quantities.
To illustrate, for an investor buying 1,000 shares of 50 sen each totalling RM500, the RM40 brokerage fee would translate into a transaction cost of 8%. As such, the price of the stock would have to gain at least 10% for the investor to make a meaningful return on investment.
An industry observer said investors might lose interest in low-priced shares given their high break-even level.
For example, the break-even price for 1,000 shares of RM1 each based on the new brokerage fee would be above RM1.04 per share compared with RM1.012 at the current minimum charge of RM12. This is excluding the stamp duty and clearing fee.
Bursa Malaysia, in an e-mail reply to StarBiz, said the higher minimum brokerage rate was intended as an incentive for remisiers and brokers to increase trading activity in the stock market.
“The current minimum brokerage is too low to cover the business cost and resources involved in smaller trades,” the exchange said, adding that retailers would be encouraged by the reduction in clearing fees to 0.03% from 0.04% previously.
Furthermore, the transition to fully negotiable commission rates for Internet trading would provide an alternative for smaller retail investors, which would save costs and boost Internet trading usage in the market, Bursa added.
Remisiers Association president Sam Ng said the increase in broking fees would also help curb speculative trading, hence, providing price stability.
“We want to encourage investors to hold for a longer period to see an appreciation instead of trading for the short term, which creates volatility. Volatility does not help instil investor confidence,” he said.
A dealer at a bank-backed brokerage said the reduction in clearing fees would make the impact of the higher broking charges “neutral”.
Moreover, he said, day traders usually bought a large number of shares and, hence, the fee increase was unlikely to significantly impact on them.
The Securities Commission had yet to respond to queries from StarBiz at press time.
Thestar
