RHBInvest Share Margin Financing
 

Borrow To Invest: Borrowing to Invest Explained


Step 1: Providing security for your loan


Initially, you must provide security for your loan in the form of existing shares or fixed deposit/cash.  RHB Bank Share Margin Financing (SMF) lends against those securities with margin of financing at 60%
The actual amount of the facility available for your use at any time under SMF Facility shall not :-

  • For Fixed Deposit/Cash pledged to the Bank, exceed two point five (2.5) times the amount of Fixed Deposit  with margin of financing at 60%
  • For shares pledged or charged to the Bank, exceed one point five (1.5) times the market value or bank’s internal valuation of the shares pledged or charged, whichever is lower, with margin of financing at 60%

Notwithstanding the above, the amount of shares pledged may be subjected to price capping at the bank’s sole discretion and the utilization of facility  for account with facility limit exceed RM500,000 is also subjected to share concentration capping as follows:

  • For customer with SMF facility amount >RM500,000, the allowable shares concentration value is based on the prevailing market capitalization of each individual stock.
Table 1

Counter with Market Capitalization Maximum shares  concentration value [% over total shares value
>RM1 bil 80% of total shares value
>RM750 mil <RM1 bil 70% of total shares value
>RM500 mil <RM750 mil 60% of total shares value
<RM500 mil 50% of total shares value

Illustration: [Customer : Mr. XYZ]

Shares Portfolio details as follow:

Table 2


Counter 		Market Capitalization Qty shares Capped Price Shares Value Maximum Concentration % Maximum Shares Value Adjusted Shares Value
FRT RM350 mil 2,000,000 RM1.50 RM3,000,000 50% of RM5,000,000 RM2,500,000 RM2,500,000
GHF RM1.2 bil 300,000 RM6.00 RM1,800,000 80% of RM5,000,000 RM4,000,000 RM1,800,000
DSC RM800 mil 200,000 RM1.00 RM200,000 70% of RM5,000,000 RM3,500,000 RM200,000
      Total RM5,000,000     RM4,500,000

    
Note:
Due to over concentration in FRT stock,  the stock FRT in this customer’s SMF account is subject to haircut of RM500,000 [FRT’s shares value will be automatically reduced from RM3,000,000 to RM2,500,000]. In order to maximize the utilization of SMF facility, the customer is advised to diversify the shares portfolio.

  • Based on Table 2 above 
  • The customer would be given share trading limit of RM6,750,000 [RM4,500,000*1.5] in SMF account to buy shares listed on Bursa Malaysia subject to approved facility amount and MOA at 60%

MOA        =                                          Outstanding Loan
                                             Pledged Shares Value + Purchase Shares Value

              =                                        RM6,750,000  
                                             RM4,500,000 + RM6,750,000

              =                                                60%

                                                                OR

  • The customer would be entitled for cash advance of RM2,700,000 [RM4,500,000*0.6] from SMF account subject to approved facility amount.

 

MOA        =                                          Outstanding Loan
                                             Pledged Shares Value + Purchase Shares Value

              =                                            RM2,700,000
                                                         RM4,500,000 + O

              =                                                  60%

Note:
The customer is also allowed to perform any combination between buying shares, redemption of SMF loan and cash advance from the account so long as the MOA is < 60%.