Investment Banks in Malaysia

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Questions and Answers

Which function is NOT typically managed by the Equity Capital Markets department of an investment bank?

  • Placement and trading of stocks and shares.
  • Activities in the secondary equity market.
  • Share margin financing. (correct)
  • Activities in the primary equity market.

An investor seeks advice on a potential company acquisition. Which service should they expect from an investment bank?

  • Opening a CDS account.
  • Equity placement and trading.
  • Mergers and Acquisitions (M&A) advisory. (correct)
  • Collateralized trading accounts.

A company undergoing financial difficulties requires assistance to redefine its capital structure and business operations. Which advisory service would an investment bank most likely offer?

  • Restructuring and Reorganization. (correct)
  • Strategic advisory.
  • Share margin financing.
  • Equity underwriting.

A client wants to participate in the stock market but needs financing to increase their purchasing power. Which service would an investment bank provide to meet this need?

<p>Share margin financing. (B)</p> Signup and view all the answers

A company is planning to raise capital through an IPO. Which of the following services would an investment bank provide?

<p>Arranging, structuring, and underwriting of stocks and shares. (B)</p> Signup and view all the answers

Which of the following best describes the primary role of an investment bank?

<p>Facilitating large and complex financial transactions and acting as intermediaries between securities issuers and the investing public. (B)</p> Signup and view all the answers

What was the main objective behind Bank Negara Malaysia's (BNM) introduction of investment banks in 2005?

<p>To strengthen the finance sector through the transformation of existing financial institutions. (B)</p> Signup and view all the answers

What is the role of an Authorised Depository Agent (ADA) in the context of investment banking services?

<p>Handling CDS account-related activities. (D)</p> Signup and view all the answers

Before becoming investment banks, merchant banks, stock-broking companies, and discount houses had to transform by what time?

<p>The first quarter of 2007. (C)</p> Signup and view all the answers

Which of the following activities is NOT a function typically performed by investment banks?

<p>Directly regulating market trading activities. (D)</p> Signup and view all the answers

What is the primary purpose of custody and nominee services offered by investment banks?

<p>To manage and hold securities on behalf of clients. (B)</p> Signup and view all the answers

Which of the following is NOT a primary service offered by investment banks?

<p>Providing deposit insurance for individual savings accounts. (A)</p> Signup and view all the answers

How do investment banks support companies in raising capital?

<p>By facilitating access to debt and equity markets through underwriting and other services. (C)</p> Signup and view all the answers

An investor wants to analyze the potential risks and rewards of investing in a particular stock. What service can they obtain from an investment bank?

<p>Market research and performance analysis. (A)</p> Signup and view all the answers

A company seeks to restructure its debts and improve its financial stability. Which service would an investment bank provide?

<p>Restructuring and reorganization (B)</p> Signup and view all the answers

Which of the following best describes the role of discount houses before the introduction of investment banks?

<p>Managing the liquidity of the banking system. (D)</p> Signup and view all the answers

If a company wants to raise capital by issuing new shares, which service of an investment bank would be MOST beneficial?

<p>Underwriting (B)</p> Signup and view all the answers

What are the two main types of markets investment banks help companies access when raising funds?

<p>Debt and equity markets. (A)</p> Signup and view all the answers

An investment bank is advising a company on how to defend against a hostile takeover bid. Which service is the investment bank providing?

<p>Advisory in merger and acquisition (B)</p> Signup and view all the answers

Which of the following is an example of institutional investing facilitated by equity broking services of an investment bank?

<p>A pension fund investing in a diversified portfolio of stocks. (D)</p> Signup and view all the answers

Which activity primarily focuses on aiding companies in preparing for their initial public offering (IPO) on stock exchanges?

<p>Advising and preparing companies for floatation on the stock exchanges. (D)</p> Signup and view all the answers

A client seeks advice on enhancing their capital structure. What service would an investment bank provide to address this need?

<p>Corporate restructuring exercises to restructure a company’s gearing. (B)</p> Signup and view all the answers

Which service offered by investment banks is most concerned with providing clients expertise in creating debt financing programs using debt securities?

<p>Debt Capital Markets. (B)</p> Signup and view all the answers

What role does an investment bank play when it underwrites the issuance of debt securities?

<p>Guaranteeing the sale of securities at a set price, assuming the risk of unsold securities. (A)</p> Signup and view all the answers

Which function of an investment bank involves distributing informed views and actionable ideas on markets and companies to clients?

<p>Research activity. (A)</p> Signup and view all the answers

A fund manager is seeking an objective assessment of the investment climate in the Malaysian equity market. What type of report would they likely consult?

<p>A research report from an investment bank. (C)</p> Signup and view all the answers

A company requires short-term financing while waiting for the issuance of debt securities. What type of financing arrangement might an investment bank provide?

<p>Bridging Loans. (B)</p> Signup and view all the answers

What is the primary purpose of an investment bank's research analysts following stocks and bonds?

<p>To make recommendations on whether to buy, sell, or hold those securities. (C)</p> Signup and view all the answers

Which of the following tasks is NOT typically handled by the Debt Capital Markets department of an investment bank?

<p>Providing equity research reports. (B)</p> Signup and view all the answers

What is the main purpose of an investment bank providing an agency role throughout the tenure of debt securities?

<p>To manage and oversee the debt securities on behalf of the issuer, ensuring compliance and smooth operation. (C)</p> Signup and view all the answers

Flashcards

Investment Bank

A financial intermediary specializing in large, complex financial transactions, like underwriting.

Securities Underwriting

Acting as an intermediary between a company issuing securities and the investing public.

M&A Advisory

Providing advice and assistance during company mergers, acquisitions, and restructurings.

Institutional Brokerage

Serving as a broker and financial advisor, particularly to institutional clients.

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Equity Broking

Buying and selling stocks on behalf of both individual and institutional investors

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Fund Raising (Investment Bank)

Raising capital for companies through debt or equity markets.

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Investment Research

Analyzing companies and industries to provide investment recommendations.

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2007 Investment Bank Transformation

Shift requiring merchant banks, stockbrokers, and universal brokers to become investment banks

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Investment Bank Formation (Malaysia)

Merging merchant banks, stockbroking companies, and discount houses.

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Role of Discount Houses

Act as keepers of liquidity for the banking system.

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Equity Capital Markets

Deals with a bank's activities in primary and secondary equity markets.

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Placement and Trading

Involves the sale and purchase of company stocks.

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Underwriting

Managing new stock offerings and agreements.

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Investment Advisory

Providing advice to clients on potential investments.

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Share Margin Financing

Allowing clients to borrow money to invest in shares.

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Market Research

Analyzing market trends and company performance.

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CDS Accounts

Accounts used for holding and managing shares electronically.

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Authorised Depository Agent (ADA)

An agent authorized to manage share deposits and withdrawals.

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Collateralised Trading Accounts

Accounts linked to share trading used with borrowed funds.

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Custody and Nominee Services

Holding assets on behalf of clients.

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Floatation Advisory

Guiding and preparing companies to be listed on stock exchanges.

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Mergers and Acquisitions (M&A) Advisory

Helping clients find merger partners/takeover targets; advising on M&A deals.

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Capital Raising Strategies

Creating and executing plans for capital raising through securities.

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Corporate Restructuring Advice

Advising on how to restructure a company's finances or operations.

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Independent Corporate Valuation

Offering unbiased assessment of deals and valuing companies/assets.

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Debt Capital Markets (DCM)

Expertise in structuring debt financing using bonds or other debt securities.

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Debt Securities Issuance

Advising and arranging the issue of debt securities (bonds).

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Bridging Loans

Short-term loans provided while waiting for debt securities to be issued.

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Underwriting Debt Securities

Guaranteeing the sale of newly issued debt securities.

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Study Notes

  • Investment banks are financial intermediaries specializing in large, complex transactions like underwriting
  • They act as intermediaries between securities issuers and the investing public

Development of Investment Banks in Malaysia

  • Investment banks in Malaysia were established in March 2005
  • Bank Negara Malaysia (BNM) introduced them to strengthen the finance sector
  • They are licensed by the Securities Commission and BNM to perform investment banking functions
  • A new structure transformed merchant banks, stock-broking companies, and universal brokers into investment banks by the first quarter of 2007
  • This transformation merged merchant banks, stockbroking companies, and discount houses into investment banks
  • Discount houses were traditionally keepers of liquidity for the banking system

Establishment of Investment Banks in Malaysia

  • Maybank Investment Banking Berhad
  • Affin Investment Bank
  • CIMB Investment Bank
  • Hong Leong Investment Bank
  • Kenanga Investment Bank

Other Investment Banks in Malaysia

  • Affin Hwang Investment Bank Berhad
  • Alliance Investment Bank Berhad
  • AmInvestment Bank Berhad
  • CIMB Investment Bank Berhad
  • Hong Leong Investment Bank Berhad
  • KAF Investment Bank Berhad
  • Kenanga Investment Bank Berhad
  • MIDF Amanah Investment Bank Berhad
  • Maybank Investment Bank Berhad
  • Public Investment Bank Berhad
  • RHB Investment Bank Berhad

Equity Broking

  • The Equity Capital Markets department manages investment banks' activities in primary and secondary equity, and equity-linked markets
  • These services include: Placement and Trading of stocks and shares, Arranging, structuring, and underwriting of stocks and shares, Advising on investment activities, Share margin financing, Market research and performance analysis, Authorised Depository Agent (ADA) services consisting of; Opening/updating/closing of CDS accounts, Deposit/withdrawal and transfer of CDS shares, CDS settlement and reconciliation of shares, CDS balance enquiries, Custody and nominee services, Collateralised trading accounts, Share margin trading accounts, Custodian accounts

Advisory Services

  • Investment banks provide advisory services to clients on mergers and acquisitions, underwriting, restructuring and reorganization, and strategic advisory
  • These services include:
  • Advising and preparing companies for flotation on the stock exchanges
  • Identifying potential merger partners and take-over targets for clients for mergers and acquisitions, and take-over transactions
  • Devising and executing strategies for capital raising activities by placing securities, secondary issues, special issues, convertible loans, and other capital market instruments
  • Providing from corporate restructuring exercises to restructure a company's gearing or business operations
  • Offering independent evaluation of corporate transactions and valuation of companies/business/securities and assets

Fund Raising

  • The Debt Capital Markets department provides corporate clients with expertise in structuring debt financing programs through debt securities instruments, either conventional or Islamic financing
  • These services include:
  • Advising and arranging for the issuance of debt securities
  • Arranging or providing "Bridging Loans" pending the issuance of debt securities
  • Underwriting and subscribing the issuance of debt securities
  • Placement of debt securities (through fixed income)
  • Acting as an agency throughout the tenure of the debt securities

Research Services

  • Investment banks disseminate informed views and actionable ideas on economic indicators, markets, and companies in Malaysia on a daily basis
  • The views and recommendations are distributed as research reports, which are given to fund managers to form an objective assessment of Malaysia's investment climate and opportunities in the equity market
  • Research reports example: Malaysian Equity Strategy, MIDF Equity Beat, and MIDF Economics
  • Research analysts follow stocks and bonds and make recommendations on whether to buy, sell, or hold those securities

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Related Documents

FIN346 Chapter 4 PDF: Operations and Services of Investment Banks

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