Investing in US Stocks from Malaysia: 7 Things You Must Know First
The United States stock market is the largest investment pool in the world. It accounts for more than 40% of global stock market value and is home to giants like Apple, Microsoft, Nvidia, Google and Amazon. It is no surprise that many Malaysian investors are looking towards Wall Street, especially now that local brokers make access easier than ever.
But before you dive into US stocks, there are several important things that many new investors overlook - from dividend tax to currency risk and shariah status. This article breaks down 7 things you must know so your investment decisions are smarter and better prepared.
Quick Summary: What You Need to Know
Before investing in US stocks, understand these 7 core points: (1) the type of account to access the US market, (2) the 30% dividend tax because Malaysia has no tax treaty with the US, (3) USD/MYR currency risk, (4) late-night trading hours, (5) how the market structure differs from Bursa, (6) shariah status that is not automatic, and (7) US estate tax for foreign investors. Understand all seven and you will enter the market with your eyes open, not blindly.
Point #1: How to Get Access - Pick the Right Account
You do not need to fly to New York to invest on Wall Street. Today, there are several ways for Malaysian investors to access the US stock market:
- Local brokers with global access - brokers like M+ Global (Malacca Securities), Webull and Moomoo let you trade Bursa Malaysia, US and Hong Kong stocks in a single app.
- Cross Border Trade (CBT) - some investment banks offer cross-border trading services for investors who already hold a local stock account.
- International brokers - platforms such as Interactive Brokers offer direct access but usually require deeper understanding.
Brokers like Moomoo are now licensed by the Securities Commission Malaysia and investor assets are protected under the Capital Markets Compensation Fund up to RM100,000. Before signing up, check the transaction fees, currency conversion fees, and whether the platform supports the market you want. If you are just starting out, read our guide on Moomoo as a global stock broker for a clearer picture.
Point #2: The 30% Dividend Tax - Malaysia Has No Tax Treaty With the US
This is what surprises Malaysian investors most often. Under US tax law, foreign investors are charged a withholding tax of 30% on dividends paid by US companies. According to IRS Publication 515, this default rate applies to all non-residents.
Some countries can reduce this rate to 15% through a bilateral tax treaty. Unfortunately, Malaysia does not have a tax treaty with the United States, so Malaysian investors are still charged the full 30%. You still need to fill in the W-8BEN form to certify your status as a foreign resident - this form is valid for 3 years and must be renewed before it expires.
The good news is that the United States does not impose capital gains tax on foreign investors. This means profits from your share price appreciation are not taxed by the US. Only dividends are affected. If you focus on growth stocks that pay little in dividends, the impact of the 30% tax becomes smaller. To better understand cross-border dividend taxation, refer to our article on foreign stock dividends.
Point #3: USD/MYR Currency Risk
When you invest in US stocks, you are actually making two investments at once: in the stock itself, and in the US Dollar (USD). Your Ringgit capital is converted to USD to buy the shares, and converted back to Ringgit when you sell.
This means exchange rate movements can add to or erode your profits. For example, if your stock rises 10% but the Ringgit strengthens 8% against the Dollar over the same period, your actual profit in Ringgit becomes far smaller. Conversely, if the Ringgit weakens, it can be an added bonus. This currency risk does not exist when you invest on Bursa Malaysia, so factor it into your expected returns.
Point #4: Late-Night Trading Hours
The US stock market operates on Eastern Time, namely 9:30 am to 4:00 pm New York time, Monday to Friday. Due to the time zone difference, this means the market opens at night in Malaysia:
- Summer (Daylight Saving): roughly 9:30 pm to 4:00 am Malaysia time.
- Winter (standard time): roughly 10:30 pm to 5:00 am Malaysia time.
For investors following a long-term buy strategy, these hours are not a big issue - you can place your orders and sleep. But if you are the type who likes to monitor price movements actively, be prepared to stay up late. Some brokers also offer pre-market and after-hours sessions for added flexibility.
Point #5: The US Market Works Differently From Bursa Malaysia
The US stock market has several important structural differences compared to Bursa Malaysia:
- Minimum 1 share: On Bursa Malaysia, you must buy at least 1 lot (100 units). In the US, you can buy as little as 1 share. Some brokers even offer fractional shares - you can buy a small portion of an expensive stock priced in the hundreds of dollars.
- Three main indices: the S&P 500 (the 500 largest companies), the Dow Jones Industrial Average (30 blue-chip companies), and the Nasdaq Composite (many technology companies). Understand the differences in our guide What is the Dow Jones, S&P 500 and Nasdaq.
- Several different exchanges: the NYSE and Nasdaq are the two main exchanges, each with its own characteristics. Read more about the similarities and differences between NYSE, NASDAQ and AMEX.
Point #6: Shariah Status Is Not Automatic
Unlike Bursa Malaysia which has a list of shariah-compliant stocks approved by the Shariah Advisory Council of the Securities Commission, stocks in the US market do not come with automatic shariah certification. Many large US companies are involved in non-compliant activities, or carry high interest-bearing debt ratios.
If shariah compliance matters to you, you need to screen on your own using shariah screening apps (such as Wahed, Zoya or Musaffa), or choose an Islamic global account offered by brokers like BIMB, CGSI iTrade or MIDF Invest. This screening assesses a company's income sources and financial ratios so your investment stays shariah-compliant.
Point #7: Estate Tax & Hidden Risks
One thing that is rarely discussed but important: US estate tax. For foreign investors, only an exemption of up to USD60,000 is allowed. If the value of your US assets (including stocks) exceeds that amount at the time of your death, your estate could be taxed up to 40%. This matters for investors who intend to build a large US portfolio - consider appropriate estate planning.
In addition, be aware of delisting risk - a stock can be removed from the exchange for various reasons. Understand what happens to your investment in such a situation through our guide on what happens when a US stock is delisted.
Smart Alternative: Ireland-Domiciled ETFs
For investors who want to reduce the impact of the 30% dividend tax, there is an increasingly popular strategy: investing through Ireland-domiciled ETFs. Because Ireland has a tax treaty with the United States, Irish ETFs are only charged a 15% withholding tax on US dividends - half the 30% rate imposed on Malaysian investors directly. Ireland also does not impose additional tax on Malaysian investors.
Popular examples of these ETFs include those tracking the S&P 500 index or global markets. This strategy suits long-term investors who want exposure to the US market while optimising tax costs. To understand why so many investors choose this market, read 7 reasons to invest in US stocks.
Step by Step: How to Start Investing in US Stocks
Once you understand all seven points above, here are the practical steps to get started:
- Set your goal and budget. Decide what percentage of your portfolio you want to expose to the US market. Do not commit all your capital at once - start with an amount you are willing to leave invested for the long term.
- Choose and open a broker account. Compare transaction fees, currency conversion fees and the broker's reputation. Pick a broker licensed by the Securities Commission for added protection.
- Complete the W-8BEN form. This form is usually provided during account opening. Make sure it is filled in correctly to avoid tax issues.
- Do shariah screening if needed. Use a screening app or an Islamic global list before buying any stock.
- Start with stocks or ETFs you understand. Rather than chasing whatever stock is going viral, focus on companies or index funds whose model you understand. Good investing starts with understanding, not speculation.
Patience and discipline are key. The US market offers great opportunities, but it also fluctuates. A consistent long-term approach usually beats trying to jump in and out based on emotion.
Frequently Asked Questions (FAQ)
What is the minimum capital to start investing in US stocks?
There is no fixed minimum. Because you can buy as little as 1 share (or fractions of a share through fractional shares), you can start with a small amount of capital. However, account for transaction fees and currency conversion fees so costs do not eat into your profits.
Do Malaysian investors pay tax in Malaysia on US stock gains?
For now, capital gains from stock investments (including foreign stocks) are not subject to individual capital gains tax for most retail investors in Malaysia. However, US dividends are already cut by 30% at the US level. Consult a qualified tax adviser for your personal situation, as tax rules can change.
What is the W-8BEN form and why is it important?
The W-8BEN is an IRS form that certifies you as a foreign tax resident (not a US citizen). Your broker will usually ask you to complete it during account opening. It is valid for 3 years. Without a valid W-8BEN, your broker may withhold a higher rate.
Can I invest in US stocks in a shariah-compliant way?
Yes, but you need to screen on your own because US stocks do not come with automatic shariah status. Use a shariah screening app or choose an Islamic global account from a local broker that offers one.
What time does the US stock market open in Malaysia time?
The US market opens roughly 9:30 pm to 4:00 am (summer) or 10:30 pm to 5:00 am (winter) Malaysia time, depending on Daylight Saving Time in the US.
What is the biggest risk of investing in US stocks from Malaysia?
Three main risks: the 30% dividend tax, USD/MYR currency risk, and the 40% estate tax on assets exceeding USD60,000. Ordinary market risk (price volatility) also applies as with any stock investment.
Which broker is best for new Malaysian investors?
Local brokers licensed by the Securities Commission such as M+ Global, Moomoo and Webull are safe choices for beginners because they are regulated and offer access to Bursa Malaysia, US and Hong Kong markets in a single platform.
Conclusion
Investing in US stocks opens the door to the world's leading companies and the most liquid market on the planet. But this opportunity comes with the responsibility to understand the 30% dividend tax, currency risk, trading hours, shariah status and estate tax. Investors who prepare with this knowledge will make calmer, more strategic decisions than those who enter blindly.
Once you understand these important points, the next step is to make sure you have an account that lets you invest easily - not just in the US market, but on Bursa Malaysia too.
Open your CDS account today to start investing on Bursa Malaysia as well as foreign stocks such as the United States (US) and Hong Kong markets through one single platform.
And if you are still new to stock investing, download our free Stock Market Basics Ebook to build a solid foundation before you invest.