Investment Products on Bursa Malaysia: Shares, Warrants, REITs and Derivatives
Bursa Malaysia is an exchange holding company approved under Section 15 of the Capital Markets and Services Act 2007.
Most people only know that Bursa Malaysia offers the buying and selling of shares.
But did you know there are many other investment products available? We break them down one by one.
A share is proof of ownership in a company or enterprise in the form of equity. Shares are divided into two types: ordinary shares and preference shares.
Still new to the stock market? Here are things you must know.
Also known as equity shares, these represent the risk capital of a company. Ordinary shares give holders ownership rights in the company, such as the right to share in profits, the right to vote at general meetings, and the right to elect and remove directors.
Ownership obligations are also conferred, and this can lead to loss of the investor''s money if the company is not successful.
Typically, ordinary shares form the majority of a company''s capital and do not have any special privileges over other shares.
In the event of liquidation, ordinary shares rank after all other liabilities of the company.
These shares give the right to dividends (usually fixed) and are prioritised in payment ahead of ordinary shareholders.
When it comes to asset distribution upon company liquidation, preference shares are favoured.
Generally, preference shares do not carry voting rights, but voting rights may be granted depending on the failure to pay dividends on preference shares for a specified period of time.
2. Warrants
Warrants give the holder the right, but not the obligation, to subscribe for new ordinary shares at a predetermined exercise price within a specified period of time.
After the specified period, warrants become worthless.
When purchasing warrants, the amount paid is usually lower than the price of the underlying share or asset.
Therefore, it does not require high capital compared to buying shares or the underlying asset directly from the market.
In essence, warrants give you the right to purchase the underlying instrument at an agreed price within a predetermined timeframe.
It is important to note that warrants become worthless after the expiry of the exercise period.
Read about the 5 things you must know before buying warrants, the differences between warrants WA, WB, WC and CA, and how to calculate warrant premiums.
3. REITs
Real Estate Investment Trusts (REITs) are funds or unit trusts that own and manage commercial properties to generate income (shopping complexes, hospitals, plantations, industrial properties, hotels, and office blocks).
REITs provide investors with the option to invest in large-scale, quality commercial real estate without the need to purchase the property directly, offering a stable income stream and attractive distribution yields.
Examples of REITs listed on Bursa Malaysia include Starhill REIT, Sunway REIT, UOA REIT, KLCC REIT, and many more.
4. Derivatives
Derivatives are financial instruments used to manage one''s exposure to current market volatility.
The value of derivative products depends on and is derived from underlying instruments, such as commodities, interest rates, indices, and shares.
In other words, derivatives are financial contracts with values linked to the anticipated future price movements of the underlying assets they are associated with.
They are used as tools for hedging, speculation, and arbitrage.
Futures and Options are the basic derivative products most commonly traded on the exchange.
A futures contract is an agreement between two parties to buy or sell an underlying instrument at a specific time in the future at a price determined today.
Examples of derivatives in Malaysia include Crude Palm Oil Futures (FCPO) and FTSE Bursa Malaysia KLCI Futures (FKLI).
Reference: Bursa Malaysia
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