Rule of thumb is that you should avoid non-bank backed Investment Banks.
They have very high cost of fund in which translate to higher interest cost to you.
Next is to look at each IB's policy on marginable or capping of each counters.

Few thing to avoid billshock,
-fee on un-utilized facility, some chargers handling fee annually if you leave your facility dormant
-qtr rollover, some has 0.25%, 0.5%, some none
-redemption fee, (something like those credit card balance transfer to another bank

also another thing is to ask if they would refund your stamp duty. they normally refund when hit certain criteria & timeline (2x margin limit turnover, brokerage = stamp duty)



My take:
CIMB
-one of the best I've used. but dealers aren't that responsive. Expect little to no service but compensated by their good online platform
-try catching them doing mistakes, they normally response by cutting rates & such.

Maybank
-Ace 50%, Midcap 80-100%, Full Value of Large cap.
-slow, sometimes would hit problem when buying, takes half to 1 day to resolve the issue

Public
-by far the worst amongst the list in terms of counter capping.
-paid 10k for stamp duty to find out the 5 counters which i subsequently wanted to buy either have no limit or 20% capping.
-ever since that, i've close off the facility.

RHB/Hong Leong/Alliance
-somewhere in between, neither cheap not expensive, not much to comment.

I should really read your advice first, i have signed up the public bank, the cap limit is superb low, they can't expect i buy blue chip all the while ..i miss out the buying oppty due to this

could you share further on CIMB cap limit ? can list down cap limit for weida and cheewah ?

as usual, CIMB didnt pick up my phone, checked with Maybank, Cheewah 80% capping, Weida 100%.

Damn, the cap limit is so much better compare to PBB.

here is what i got from PBB this morning.
Weida = RM1.5
Cheewah=0.3

Thanks king for helping up ...May i know which branch of maybank and CIMB using? could other CIMB branch provide better service ?

From HLB as at 22 01 16
Cheewah - Nil
Weida - RM1.40 with 95% of MV

oh...that's bad

Thanks for update! but that's bad

Foxxy, what you means by MV ?

Market value

Read the whole tread but no clear description of how SMF actually works in terms of:

Purchasing a Blue Chip (BC), Financing say 4%, the BC increase 3 fold after 5 years, yearly dividend 5%, I sell the share, what's the return on my investment?

Anyone can enlighten me? Thanks.

Let me try my attempt in your question

I use example of rm 100k cash invested in blue chip A bhd of rm 1.00 per share at the time invested. (Based on No brokerage and stamp duty and clearing fee)

Initial investment = 1000 lots @ rm 1, hence rm 100k capital fully utilize.

Usually blue chip margin of finance will be 90% to 100%, for this case, i take 100%.

So all 1000 lots of A bhd pledge into share margin account as a collateral. Market value of 100k, margin of 100%, hence your share margin facilites will have 100k credit facilities chargeable at 4% per annum when utlized.

Assume u also utilize all 100k from margin at the same stock A bhd, that will be another 1000 lots.

Case 1.
Dividend 5% from par value of rm1.00 per annum (net amount for easy calculation)
Straight forward case
1000 lot that you held, u get 5%
1000 lot that you used margin facilities at 4% per annum, hence net 1%

So your 100k is giving you 6% when u use margin, rather than just 5% is you do not use margin


Case 2.
3 fold after 5 years

1000 lot you held using your own cash become rm 3, means 300k
1000 lot in margin also become 300k.

So your 100k invested, when fully sold will get 600k.
So that is 600%

But i didnt factor i the 4% for margin financing.

Thanks for taking the time to study and respond, Bonescythe.

Make sense, my cost is that I service the interest payment of 4%, the result of 600k is all mine after selling the share.

But another point, if I pumped in 100k cash, but purchased 200k in shares, that should mean I service 200k x 4% interest payment right?

If u pump in 100k into share margin account, the 100k cash is yours.
and with that 100k cash, your margin limit for the time being will be 200k (based on cash collateral x 2).
So 100k is urs, and anything above 100k, will be chargeable with 4% interest p.a.

If you had used 100k cash of yours purchasing some shitty counter that margin recognize 30% only..

that means 100k is used up for that particular share purchase, and automatically act as collateral. but due to recognized margin only 30%, so you will be left with 30k instead of 100k from the cash collateral. So your margin account will suddenly change from 200k to 30k left. (After you used your own 100k to purchase the shitty counter)

You must understand the nature of instrument

100k = cash

after purchase using 100k

the cash change it's form to "share", and the share have a value that float up and down, depending on market forces.

Ah clear, so it's always cash first then the rest financed. Thanks, bro.

Btw.. something to take note on margin financing with shares as collateral.

Collateral via cash and shares are different.
Cash is the best steady collateral that will not fluctuate in value (for local market)

Share as collateral is a bit tricky. The "recognized value" is determined by market price x marginable value.

One of the risky part of margin is a change of fundamental in your collateralized share.

Normally, public thinking is that margin call is from the drop of share prices.

Another factor on margin call is the changr of marginable value due to a change of fundamental.

For example, 100k use to purchase rm1.00 stock with 100% margin value, then your margin pocket have another extra rm 100k

But if the margin value change to 50%, your margin pocket will sudden become 50k. And you will have to fork out rm 50k to top up that sudden difference.

Just a note from my piece of 2 cent experience

That's tricky, I suppose it differentiates from one bank to another. Read Maybank and CIMB are more reliable, public bank not so much. In your experience the banks give any indicators/announcements much earlier?

Also, good to keep a margin of safety by not fully utilizing the 100% margin allocation offered.

From my experience, no warning in margin value changes.. so sendiri zap sang

Allow me to ask a stupid question

Let say I’ve 100k share value in Maybank . Is it possible for me to open SMF in public bank using this 100k as my shares collateral ?

Also, which bank are recommended for SMF in 2018.

Thanks!

This post has been edited by kekayo: Jan 11 2018, 06:16 AM

Leverage amplified profit as well as losses.

Which bank offers the best SMF package and rates now?