How to Buy IPO Stocks in Malaysia

In the capital markets, Initial Public Offering (IPO) is undoubtedly one of the most exciting voyages. For many investors, IPO represents a unique opportunity to purchase shares at an initial price that may subsequently increase in value as the company grows.

For investors eager to get a piece of the Malaysian capital market, understanding how to buy IPO shares is crucial. It's not just about recognising which companies are about to go public, but more importantly, it involves understanding the entire IPO process, from opening a trading account to placing a purchase order to monitoring the performance of your investment.

This article will start with the basics of IPOs, explaining what they are and why they are an attractive option for investors. It will also look at how to spot upcoming IPO stocks listed in Bursa Malaysia and how to use trading platforms like Moomoo MY to streamline the investment process. The purpose of this article is to provide investors with a comprehensive perspective so that they can confidently navigate this market of opportunity.

What is an IPO in Bursa Malaysia?

Initial Public Offering (IPO) is when a private company first sells its shares to the public, marking its transition into a publicly listed company. In Malaysia, this process is conducted through Bursa Malaysia. When a company is listed on Bursa Malaysia, it is not only able to raise a large amount of capital for expansion and growth, but it also increases the company's visibility and credibility.

An IPO is often seen as an important milestone in the growth of a business because it allows a company to attract capital from a broader group of investors. For the average investor, participating in an IPO means having the opportunity to purchase shares in these newly listed companies at the initial issue price, which is often more favourable than the market price after the shares have officially traded. However, not all IPOs are successful investments; therefore, it is crucial to understand the market dynamics, company fundamentals and the associated risk factors before deciding how to buy IPO stocks in Malaysia.

The Significance of IPOs for Companies

• Capital raising: Through an IPO, a company can raise a large amount of money from a wide range of investors for the purpose of expanding its business, repaying debt or conducting research and development, among others.

• Increased liquidity: the company's shares are traded on the market, making it easier for existing shareholders to buy and sell shares and increasing the liquidity of the equity.

• Credibility and exposure: Becoming a listed company increases the transparency of the company and helps to enhance public trust. Also, being listed means more media attention and recognition within the industry.

Listing Process in Bursa Malaysia

Listing a business in Bursa Malaysia involves a series of rigorous steps that ensure fairness and transparency in the market. Below is a brief overview of the IPO listing process:

1. Preparation: The company will assemble a team of pre-IPO advisors, usually including investment banks, accounting firms and law firms. These advisors will help the company design its equity structure for the public market, conduct detailed due diligence, and prepare all necessary documentation. The Central Depository System (CDS) is managed by Bursa Malaysia Depository Sdn Bhd, emphasizing its status as a private limited company.

2. Regulatory Review: Securities Commission Malaysia (SC) and Bursa Malaysia will conduct a thorough review of all materials submitted to confirm the authenticity and completeness of the information. Feedback may be given during the review process and the company will need to make adjustments accordingly.

3. Share subscription: After receiving preliminary approval, the company will conduct a road show to introduce the company to potential investors. The underwriters will assist in determining the issue price and start accepting subscription orders from investors. Based on factors such as market demand and company valuation, the new shares will be allocated to successful subscribers.

4. Official listing: On the first day after the IPO, public trading of the new shares will commence in Bursa Malaysia, signalling the company's official status as a publicly held business.

Bursa Malaysia has three different market segments: Main Market, ACE Market and LEAP Market. The admission criteria and details of the share offering process can be viewed here.

Why Invest in IPO Stocks in Bursa Malaysia?

New companies listed on Bursa Malaysia often represent emerging industries or innovative business models, making IPOs a focus for many investors. Here are a few key reasons to invest in IPO stocks:

• Capital appreciation potential:

IPO shares are usually issued at a lower price, and once they begin trading in the secondary market, the share price may rise in response to market demand. Bursa Malaysia has a high level of market activity and IPOs are often highly sought after by investors, which provides early investors with the opportunity to make quick profits.

• Regional Market Performance:

Malaysia's IPO market witnessed an active IPO period in 2024. As of 1 November 2024, Bursa Malaysia's cumulative total number of IPOs this year reaches 41. Malaysia's IPO market performed well in 2024, not only in terms of volume growth, but also showing strong momentum in terms of total capital raised and market performance.

• Participate in company growth:

By purchasing IPO shares, investors can become shareholders in an emerging or fast-growing company. This is not only a financial investment, but also a way to support and participate in the future growth of the company.

• Diversified portfolios:

IPO stocks can help investors diversify their asset allocation. Newly listed companies often represent different industries, technologies and market trends, helping to diversify overall portfolio risk.

Risks of IPO Investments

While IPOs offer the opportunity for potentially high returns, they also come with certain risks:

• Price volatility: The price of newly listed stocks can be very volatile, especially in the early stages of listing. If market demand is not as good as expected, the share price may fall rapidly.

• Lack of historical data: Since newly listed companies do not have a long track record, it is difficult for investors to make accurate predictions about their future profitability.

• Overvaluation: Some IPOs are overpriced, resulting in poor share price performance after listing or even falling below the issue price.

How to Manage the Risks of IPO Investments

Initial Public Offering (IPO) investments can offer significant returns, but they also come with inherent risks. To safeguard your investment and maximize potential gains, it is crucial to have a well-thought-out risk management strategy. The following are some key approaches to managing the risks associated with IPO investments.

Thorough research:

It is vital to conduct thorough research before deciding to invest. Read the prospectus to understand the company's business model, financials, management background, and prospects for the industry in which it operates. Compare the price-to-earnings ratio (P/E ratio), price-to-book ratio (P/B ratio) and other key indicators of similar companies to determine whether the IPO is reasonably priced.

Diversification:

By spreading your money across multiple IPOs or other types of investments, you can effectively reduce the risk of a particular stock or sector.

Setting Stop Loss Points:

To protect yourself from significant losses, you can set a stop-loss point when purchasing IPO shares. When the stock price falls to a preset level, the shares are automatically sold to limit losses.

Stay patient:

IPOs are not a good tool for short-term speculation. For companies with good fundamentals and long-term growth potential, it may be a better strategy to hold on to the stock and wait for its value to be realised over time.

Use a professional platform:

Using a professional online trading platform such as moomoo MY can help simplify the process of buying IPO shares. These platforms often provide detailed IPO information, research reports, and a convenient application and purchase process.

How to Buy IPO Stocks in Malaysia

In Malaysia, investors can purchase Bursa Malaysia's IPO shares through a series of steps. Below is a step-by-step guide to help investors understand how to buy IPO shares in Malaysia.

Step 1: Open a Trading Account

Choosing the right broker: Firstly, you need to choose a reliable online broker or securities firm to open your trading account. Some well-known brokers such as Moomoo MY, Maybank Investment Bank (MIB) and CIMB Investment Bank offer convenient services.

Complete the account opening process: Prepare the necessary documents such as proof of identity, proof of address and bank account information and submit these documents as requested by the broker. Then wait for the broker to review and activate your account.

One thing to note: The first requirement for purchasing IPO shares in Malaysia is to have a Direct Central Depository System (CDS) account. This account is similar to a digital safe that holds your securities electronically and allows you to credit, debit or transfer securities.

Step 2: Understand the Basic Information about the IPO

• Getting a prospectus: Once a new IPO is released, you can get a prospectus through your broker or directly from Bursa Malaysia's official website. This document contains detailed information about the upcoming public company.

• Research the company's background: Read the prospectus carefully to understand the company's business model, financial position, management team and future growth potential.

• Evaluating investment value: Based on fundamental analysis of the company, combined with industry trends and your personal investment strategy, evaluate whether this IPO meets your investment objectives.

Step 3: Apply to Subscribe to IPO Stock

• Check subscription requirements: Each IPO has its own specific subscription conditions, including minimum subscription amounts and subscription deadlines. Make sure you fulfill these requirements.

• Submit a subscription application: Submit an IPO subscription application through your broker's platform. Most online platforms offer an easy application process where you just need to fill in the relevant information and confirm the subscription quantity.

• Payment of subscription: Depending on the number of subscriptions and the price per share, the corresponding funds are deposited into your trading account. Normally, this amount is temporarily frozen until the results of the allocation are announced.

Step 4: Waiting for the Allocation Result

• Allocation process: Underwriters will allocate new shares based on market demand and offering rules. If demand exceeds supply, a lottery may be used to determine who gets the new shares.

• View allotment results: Allotment results will be announced on the designated date. You can login to your brokerage account or visit Bursa Malaysia's website to check if you have been successfully allocated new shares.

• Disposal of unallocated funds: If you are not allocated new shares, the Funds on hold  will be refunded to your trading account.

Step 5: Commence Trading

• IPO: IPO shares will start trading on Bursa Malaysia on the scheduled listing date. You can decide whether to hold or sell depending on market conditions.

• Monitor market performance: Keep a close eye on the performance of IPO stocks, especially during the initial period of listing when the stock price may fluctuate significantly.

• Develop an exit strategy: Develop an appropriate buying or selling strategy based on your investment plan and the market trend.

How to Find Upcoming IPO Stock in Bursa Malaysia

For Malaysian investors looking to capitalise on investment opportunities, it is crucial to identify and participate in upcoming IPO stocks in a timely manner. Below are some practical methods and resources that can help you effectively track and identify new IPOs in Bursa Malaysia.

Visit the Official Website of Bursa Malaysia

• Official announcement: The official website of Bursa Malaysia (www.bursamalaysia.com) is one of the most authoritative sources of information. The website is regularly updated with information on upcoming IPOs, including prospectuses, company profiles and offering details.

• Market news: Follow market news and announcements issued by Bursa Malaysia, which are usually published on the homepage or in a dedicated news section.

Use of Online Trading Platforms

• Brokerage platforms: Many online brokers such as Moomoo MY offer IPO alert services. Through these platforms, you can set up notifications to be the first to hear when a new IPO is announced.

• IPO calendar: Brokerage platforms such as Moomoo MY also offer an IPO calendar feature that lists upcoming IPOs and their timelines to help you prepare in advance.

Subscription to Financial News

• Financial media: Subscribe to newsletters from mainstream financial media such as The Edge Markets, The Star, etc., which often report on upcoming IPOs and related information.

• Specialised information services: Consider subscribing to specialised financial information services such as Bloomberg, Reuters, etc., which provide in-depth market analysis and IPO previews.

Invest IPO Stocks with Moomoo MY

Moomoo MY is a multi-functional online trading platform that provides not only a wealth of market data and analytical tools, but also streamlines the IPO subscription process, making it easy for investors to participate in share offerings of newly listed companies. Below are the advantages of using Moomoo MY to purchase Malaysian IPO shares.

Convenient IPO Subscription Process

• One-stop service: With Moomoo MY, you can complete the whole process from learning about IPO information to submitting subscription application in one-stop. There is no need to switch between multiple websites or platforms, which greatly improves efficiency.

• Automatic alerts: Moomoo MY provides IPO alerts. The system notifies you when new IPO opportunities become available, ensuring that you don't miss out on any important investment opportunities. In addition, the moomoo community has has an official account dedicated to IPO news.

• Detailed prospectus: The platform provides detailed prospectus and other related documents to help you fully understand the business model, financial status and future development plans of the soon-to-be-listed company.

Low Commissions and Fees

• Transparent cost structure: Moomoo MY's trading commissions are relatively low and the fee structure is transparent with no hidden fees. This helps to reduce your trading costs and increase your ROI.

• Free market data: Many of the premium market data and services available on moomoo MY are provided free of charge, which means you can access valuable market information at no additional cost.

Safe and Reliable Trading Platform

• Advanced security measures: Moomoo MY employs multi-layered security measures including two-factor authentication, data encryption and firewall protection to ensure the safety of your personal information and funds.

• Compliance: As a broker regulated by the Securities Commission Malaysia (SC), Moomoo MY strictly adheres to all relevant laws and regulations to provide investors with a safe and secure investment environment.

For detailed steps on how to subscribe to Malaysia IPO at moomoo, you can check here.

Conclusion

This article details the steps on how to buy IPO shares in Malaysia, from opening a trading account and learning about the IPO's basic information, to applying for subscription and the final trading process. It also explores the many advantages that come with using an online trading platform such as moomoo, including a convenient IPO subscription process, low commission fees and a high level of security. These resources and tools can help investors participate more effectively in IPO investment opportunities in Bursa Malaysia.

While IPOs offer advantages such as the potential for capital appreciation and the ability for investors to participate in the growth of a company, they also come with a higher level of risk. For example, newly listed companies may lack a long track record of performance and their share prices may be more volatile during the initial period of listing. Therefore, before deciding to buy Malaysian IPO stocks, it is important to conduct thorough research, assess the company's fundamentals and make an informed investment decision based on your risk tolerance and investment objectives. Through risk management measures such as portfolio diversification and setting stop-loss points, investors can better control potential risks and increase the likelihood of investment success.