If you are an investor seeking for passive income through dividend-paying stocks such as REITS, Margin Yield Enhancer may be one of the suitable investment tools you can leverage on to magnify your yields.
With Margin Financing facility, you are able to leverage up to 3.5 times of your existing capital to finance the purchase of securities by pledging cash and/or marginable securities as collateral.
|Amount Pledged||S$20,000||S$20,000 of ABC Co. shares|
|Maximum Credit Available to Buy||S$70,000 (including cash pledged)||S$50,000|
|Total Collateralized Share Value (TCSV)||
Value of Shares Purchase
|Initial Shares Pledged + Value of Shares Purchase
S$20,000 + S$50,000 = S$70,000
|Total Loan Utilized (TLU)||Value of Shares Purchased - Cash Deposit
S$70,000 - S$20,000 = S$50,000
|Value of Shares Purchased
|Minimum Financing Ratio to be maintained = 140%||(TCSV ÷ TLU) X 100%
(S$70,000 ÷ S$50,000) X 100% = 140%
|(TCSV ÷ TLU) X 100%
(S$70,000 ÷ S$50,000) X 100% = 140%
Illustration: Using Cash as Collateral
A local Singaporean client with S$100,000 cash and wants to trade on Singapore REITs market.
| Option 1:
Margin Financing Trading
|With Margin Facility|
|Buying Power||$100,000||$350,000||Increase S$250,000 by 2.5 times|
|DEF Share Price||$3.20 per unit|
|Maximum Number of Shares can be purchased||31,250||109,375||Increase 78,125 units by 2.5 times|
|Dividend for DEF Life REIT||$0.131 per share|
|Dividends Collected||$4,093.75||$14,328.13||Increase S$10,234 by 2.5 times|
|Interest Cost per year
(Assuming interest rate is 3.5% p.a. on a loan size of S$250,000)
|Profit||$4,093.75||$5,578.13||Increase S$1,484.38 by 36%|
|Yield||4.09%||5.58%||Increase by 1.49%|
You will have to open a Margin Trading Account and meet the minimum age of 21 years old in order to enjoy this facility. The average processing time takes 3 to 5 business days and is subjected to approval. More time will be required should there be any exceptional conditions for approval.
To open an account, you may contact your Trading Representative, call our Customer Service hotline at 1800 538 9889 or email to email@example.com.
The list of marginable counters offered by Margin Yield Enhancer consists of mostly S-REITs; mainly Office, Retail, Industrial, Hospitality, Healthcare, Data Centre etc. For full listing, click here.
For CGS-CIMB’s list of marginable counters for Margin Financing, you may refer to the full listing published on our website.
There will be the interest rate levied on your Margin Trading Account under the Grade-Based Margin Financing Scheme. Click here to refer to our Margin Share Financing Fees Schedule under Interest Rates Scheme II on our website.
|Grade of Securities||Grade Based Interest Rate|
|A||1 Month Sibor + 2.28%||1 Month Hibor + 2.28%||1 Month Libor + 2.28%|
|B||1 Month Sibor + 3.28%||1 Month Hibor + 3.28%||1 Month Libor + 3.28%|
|C||1 Month Sibor + 4.28%||1 Month Hibor + 4.28%||1 Month Libor + 4.28%|
|D||1 Month Sibor + 5.28%||1 Month Hibor + 5.28%||1 Month Libor + 5.28%|
|OTHERS*||1 Month Sibor + 6.28%||1 Month Hibor + 6.28%||1 Month Libor + 6.28%|
*Rates apply for all securities indicated in the CGS-CIMB Margin List as "Others".
For other fees that may apply, please refer to the Fee Schedule for full details.
A Margin call will be triggered if your Financing Ratio falls below the maintenance margin.
The margin call triggering point for Singaporeans/Singaporean Permanent Residents and Foreign clients is as follows:
|Margin Call||Force-Sell Call|
|Singaporeans/ Singaporean Permanent Residents||FR % falls below 140% but equals to or above 130%||FR % falls below 130%|
|Foreign Client||FR % falls below 160% but equals to or above 150%||FR % falls below 150%|
|Time Frame||3 market days including date of call||Same day before 2pm|
Note: FR (Financing Ratio)
Withdrawal of shares or cash is allowed if your Financing Ratio is above the Minimum FR or other maintenance margin as prescribed by CGS-CIMB Securities.
Cash withdrawal is only allowed if you have a credit balance or sales proceeds.
All withdrawals requires authorization from the client by signing the Withdrawal Form.
1) Risk of loss exceeding capital loss
An investor trading on margin can lose more than the initial capital.
2) Risk of rising interest rates
Interest Cost on margin loan might erode the gains made on Margined Securities.
In a rising interest rate environment, the interest rate on the margin loans will head higher, adding to the interest load for investors who engage in margin trading.
3) Risk of Suspension or Restriction in Trading
Market conditions (e.g. illiquidity) and/or the operation of the rules of certain markets (e.g. the suspension of trading in any security because of price limits or trading halts) may increase the risk of loss by making it difficult or impossible to effect transactions or liquidate/offset positions.
Important to Note: The list of abovementioned risks is not exhaustive.
I just started using CGS-CIMB iTrade this year, three features I find useful. iScreen which estimated the risk and trend, Bid/Ask as this feature is not free for other online brokerages and the financial details including financial reports can be easily accessed via this app. Another interesting feature iBillionaire, you can check what stock has Warren Buffett traded. Overall good user experiences. Still using this app until today. Overall experience is good.
[User Interface] - Friendly and simple to use - No fuss and good for beginner traders who require basic features
[Customer Service] - Customer service is very responsive - Broker attending to me is friendly, responsive and responsible (bothered to inform me of trades I was looking at and sends updates on market research / reviews)