Anyone know of a way to trade the KLCI long-term (as in years?)

Erm....buy and sell stocks?

I mean the index directly

Wodenus,

If you want to buy index directly, you could buy index ETF

ETF is not very liquid, better off on stocks...

If you want to trade KLCI, go for FKLI.

ETF (2 in the market) is simply too illiquid locally.

But FKLI will have rollover costs right? is it feasible to hold a position for a few years?

For normal time (most of the time, except during very bullish scenario, the rollover is advantage to the long (buy) as next month contract a lot of time is lower (range from 1-3 points up to 10 points in market down turn time) compared to spot month.

Not feasible, as longer contract is illiquid. For spot month, you get more liquid and advantage by having spot or next month contract then roll over it. You just incur the commission charge of Rm50 between the rollover while let you have the flexibility to trade in between compared to longer contract.

That's the problem. Long-term the KLCI is very predictable, but the commission will kill your profits. Is that Rm50 per lot?

This post has been edited by wodenus: May 14 2009, 03:40 PM

Yes, per contract.

But the differentiate in spot month and next month contract (if spot month price > next month) will let you gain back the RM50 if there is 1 point gap between them. So if there is more than 1 points gap, you gain more than lose in this kind of scenario.

The problem with FKLI is that you can't hold your position for long term because I believe you can't buy the contract for few years forward and the risk is very high. RM50 per point is too much of a gamble. In my humble opinion, the two effective ways to invest in KLCI for long-term are:

- Buy ETF (may be very illiquid, but it shouldn't be a factor since your target is long-term)
- Buy index funds (though they are not 100% correlated with KLCI, you can see at least an 85% correlation and they're more liquid)

Hey guys,

I have just joined the forum, after been reading your threads for the past few months.

Sorry, a little bit of from the above discussion. I have been spending my Sunday reading some of the threads from 2007 to now. Been seeing the same problem with some trading platforms. I have been using Maybank2u online trading since 2006, and I don't know why I had been so loyal to this frustrating service . I have recently read (outside this forum as well) about other online brokerages (yeah some bad things opens your eye for good ):

Jupiter (0.05-0.1), HLebroking (? commission), itradecimb (0.42?), OSK (0.7)

I am pretty much done with Maybank crap . Jupiter seems to have very low commission (which is a must for me) for online trading, however I am quite sceptical about all these platforms. Afterall, Maybank sucks to the core for their always busy system (like busy at 10.00 am and busy at 9.30pm, and busy over whole weekend, plus always logs out while trying to log in... bla bla). I did a transaction recently with KLCI at 1024pts, and I didn't even know whether my shares were sold. I followed up with another transaction a few days later just to find out all my 10000units have been sold at various prices I have ordered (or misordered!!)... and I still can't see my account details for the transaction. Imagine loosing hard earned money (and PROFIT) for some screwed up facility that you pay commissions!!

Sorry for letting out my frustration here (with Maybank) after sticking with them for almost 4 years. Anyway, I am happy to read all the threads until the latest. If anyone has used the above brokerages, please let me know your experience . I am planning to transfer all my funds from Premier to other firm once I touch down in Malaysia soon . The current bull market was a lost opportunity by trading with Maybank. I have to wait for a better timing again, and with a better and quick acting online brokerage.

Apologies for the really long mail.

PS: Excited using the emoticon (well, still learning about everything...)

Where can I buy index fund?
Is it low cost? i know PBB has launched some funds recently and their promo buy in always charge 5% commission. This is very high, I think, as I believe a true index fund that follows the KLCI doesn't need any analysis at all. Just buy the whole KLCI components only.

the problem is not about the comission. RM 50 is not a huge figure because you need 1 point to breakeven.

Bear in mind, trading futures requires margin and the contract is mark to market. The volatility is your problem, you need more money to withstand the volatility if you are not trading but holding for long term.

A lot of people don't know or realise if one is actually holding a contract of FKLI, it worth 50 x index.

So if the index is 1000, basically it worth 50K per contract but you just need to pay the initial margin, a few K (as it varied from time to time) to own those contract.

For long side,
Basically you are risking 50K (because index cannot go beyond/below zero), not a few K of initial margin you paid for the contract. So you need to have spare money to withstand the margin call if market goes against you.

For short side,
you are risking indefinite amount as there is no limit for the upside at least mathematically

Don't look at a few K initial margin as you investment, actually it is not.

Futures is a leverage tool as well.

For ordinary and less sophiscated people that wish to invest on KLCI long term as title per said, I would suggest using ETF or index fund (although there is no pure index fund but at least 90% alike) like Jordy suggested, as for futures it you don't sure what you are doing, it can kill as we know leverage is a double edge sword.

well , you can mimic the index with minor mismatch buy buying the top 10.

Cherroy, actually the max you can lose in FKLI is your margin + further downside. You need 3500 for a position and 1700 for day trading position. The biggest problem is the volatility. Albeit you have a year end positive target, but during the trading days, a 100 pts downside would wipe off you capital and you need to top up again.

You don't close the contract, you don't lose a single cent, just topping the margin doesn't mean losses.
It is unrealised losses and those margin money is still within your accout, just the money being earmarked by the investment house for their protection.