Equity Securities in Islamic Capital Market

Front

What are equity securities?

Back

Equity securities are defined as ownership in a company, commonly known as stocks or shares.

Front

What is the difference between Islamic equities and conventional equities regarding investment restrictions?

Back

Front

What is the role of a Shariah board in Islamic equities?

Back

A Shariah board oversees investments to ensure compliance with Islamic law.

Front

What are ordinary shares?

Back

Ordinary shares are known as common shares or stocks, representing undivided ownership in a company, allowing shareholders to gain profits and vote on corporate policies.

Front

What are preference shares?

Back

Preference shares are a type of equity that provides shareholders with a contractual dividend and no voting rights, with types including cumulative, non-cumulative, convertible, redeemable, and exchangeable.

Front

What is the Securities Commission Malaysia responsible for?

Back

The Securities Commission Malaysia regulates and supervises the capital market, ensuring compliance with laws related to securities trading and market participants.

Front

What is Bursa Malaysia?

Back

Bursa Malaysia acts as a stock exchange in Malaysia, providing a platform for fair and transparent trading of equity securities.

Front

What are the benefits of Shariah compliance in investments?

Back

●    Exposure to institutional investors whose mandate is only to Shariah-compliant investments such as Islamic Fund Managers, Tabung Haji, Takaful and Retakaful operators.

●    Opportunities to attract investors from the ‘ethical’ investors

●    Linkage to Middle East North African (MENA) investors who are looking for Shariah-compliant investment

●    Linkage to investors from other regions that have been affected by the credit crunch crisis. Many investors look for safer, ethical investments including Shariah-compliant, which are seen as less risky due to their prohibition of interest-based and speculative investments.

Front

What is the step in the Shariah compliance review process?

Back

Step 1: Extraction of relevant financial information from audited financial report and other material information

Step 2: Undertaking Shariah compliance review process to identify contribution from non-permissible activities.

Step 3: Compare with Shariah financial benchmark

Step 4: Tabulate the result to Shariah Advisory Council (SAC) of Securities Commission Malaysia for final consideration/decision

Step 5: Compile the result and issue list of Shariah compliant securities in May and November

Front

What is the trading procedure for equity securities?

Back

1. Account Opening

Investors open Central Depository System (CDS) account with Participating Organisation (PO) or Broker such as BIMB Securities Sdn Bhd, Kenanga Investment Bank Berhad, Maybank Investment Bank Berhad. You also will be engaged with remisier.

 

2. Engage Remisier

To buy or sell specified share, the investor needs to give the order to the remisier by providing the CDS account number for order entry.

 

3. Placing an Order

Your order is key in the Automated Trading system at the PO or key in via the PO’s internet trading system such as Affin Hwang Invest or MTrade for Maybank.

 

4. Matching Order

Order is matched automatically by the system. All the price order matched determined by market forces of supply and demand through process of bods and offers.

 

 

5. Trade Confirmation

The trade confirmation is printed out providing details such as original order number, stock number, price and quantity matched and the counter-party PO.

The remisier confirms with the investor or client that he has bought/sold the specified number of shares and the price. In order to avoid confusion, the PO has different coloured slips for ‘sell’ and ‘buy’ orders.

 

6. Contract Notes

The investor will be given contract notes consist of details transaction such as brokerage, stamp duty and clearing fee.

 

7. Delivery and Settlement (T+2)

The delivery and settlement for normal transactions is 2 trading days after the transaction date (T) hence the term T+2. No physical delivery of shares under CDS. The CDS use as book entry system to keep track of the movement of shares which arise from trades on Bursa Malaysia.