Amanah Saham Bumiputera (ASB) – Unit Trust

Actually a lot of people have been asking me about an issue about ASB. However, I think the issue is a bit more complicated and better elaborated in my next article. This time I think , as an introduction to that, I ‘d like to explain about ASB.
ASB is Amanah Saham Bumiputera. ASB is one of the unit trust.

What’s is unit trust ?
Do you know what is share or stock (in some countries, they call it stock) ? Share is a part in a business that you buy or own. Share can be valued in currency value , like RM40,000. But, usually shares are known in units. For example, a company has 1,000 units of shares, and you own 500 of the units, which also can be translated as 50% of ownership.

Each unit of shares are valued in currency denomination. For ease of understanding, I skip the topic about intrinsic value and market value. Returning to the topic, you have 500 units of share, let’s say 1 unit is RM1. So, the total value of shares you own is RM500.

Unit trust, is a type of shares. For ease of understanding, I skip the topic about Real Estate Investment Trust or any other way to use the trust money. Unit trust, in a common understanding among investors in Malaysia, is :

You buy units of shares, from a seller. Then, the seller use the money from the sales of shares to buy shares in another company. It is like you buy a car, upon the purchase, you own the car. But there is a difference. If you buy a car from a seller, once done, the money is owned by the seller. But if you buy unit trust, you own the shares (unit trust), and you still own the money although it is passed to seller. The seller can’t do anything to the money without your consent.

Abovementioned parties have specific name legally.
You, as the buyer, are called Unitholder
The seller, are called Trustee

As I have stated before, the money received by trustee is invested. It is done via buying another shares in another company. The party appointed by Trustee , to decide on which shares of another companies, to be purchased, this money managing party is called , Manager.

In short words, unit trust is when you buy shares of investment entities. Investment entities are entities which earn income by buying and selling shares. (For easy understanding, I ommit the difference between capital gain and investment gain)

Why there is such thing like unit trust ? You can always buy and sell shares directly in the share market.
There are 2 reasons why people buy unit trust.

  1. Shares of companies may be very expensive, you cannot afford to buy even a small portion of them using your money alone. In unit trust, money of many investors are pooled together to form a large fund to buy shares.
  2. Investment may be a hard topic to many, or people usually don’t have time to think on managing own investment, so hand over their money to other s (Unit trust manager) to invest it.

Most unit trust is open-ended fund. It means :

  1. You can buy any quantity of unit trust without limit. If you buy shares directly, you need to find someone else if you want to resell the shares. However, in unit trust, the good thing is, you just sell resell the unit trust back to the unit trust company.
  2. Unit trust price changes frequently. It follows the price of the shares it buys. Let’s say you buy Unit Trust A, and Unit Trust A then buy Share B. If price of share B increases by RM1, the price of Unit Trust A also rises by RM1. Unit trust price is called Net Asset Value (NAV).

One thing to stress here is, if you buy unit trust when its NAV is RM1, you usually won’t get exactly RM1, if you sell the same unit, even NAV at that time is RM1. If you buy it when NAV is RM1, the next day the NAV is still RM1, if you resell it back to the company, you will receive cash below RM1, because the Manager deduct Fee from the NAV.

As I said before, Amanah Saham Bumiputera (ASB) is an unit trust. It is managed by Permodalan Nasional Berhad (PNB), corporation owned by Malaysia government which operates as investment manager. The money is people’s money, and PNB manage on behalf of people who are the investors. There are many unit trusts managed by PNB, among others, Amanah Saham Nasional (ASN), Amanah Saham Wawasan (ASW), and so on.
ASB is unit trust which can only be bought by Bumiputera. Who is Bumiputera ? This question is beyond me. Anyway, only Bumiputera can buy ASB.

ASB is unique, no unit trust such this exists.

  • You buy ASB at RM1 per unit. You can resell it anytime, on the same day, 10 years later, and PNB will buy it back at the same RM1, no deduction. Even if the NAV falls to RM0.20, you will still resell at RM1. (But on the other hand, if NAV go up to RM20, you will still resell at the lowly RM1)

The dividend is also decent. In the past, it maintained from 12% to 14% dividend rate. Nowadays, it ranges between 7% to 9%, higher than Fixed Deposit Rate. Its security is perceived as secured as FD, price also is fixed at RM1, it is also as liquid as FD.

Let say if you plan to save enough money for your retirement , or for your children education, ASB is ideal and much better than any of the so called life insurance’s education / annuity / retirement fund.
Since it is perceived as secured by government, banks and financial institutions see ASB as good collateral. Banks see ASB as a way to profit out of thin air. They lend people a money so that the borrower use it to buy ASB. The ASB is given back to bank as collateral. The borrower only get back the ASB once all installment debt is fully repaid, at least after 10 years time, but usually after 25 years. Malay based banks like Malayan Banking (Maybank) and Bank Bumiputera (CIMB) did it first before now is popular with others.

My next article is about Loan for ASB. Is it good or bad ?
It is bad, and I will explain in my next articles.

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Pursuing To Be Affiliate of Chartered Tax Institute of Malaysia (CTIM) , Registered Financial Planner (RFP), and Association of Chartered Certified Accountants (ACCA)

Posted on September 19, 2012, in Investment and tagged . Bookmark the permalink. Leave a comment.

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