BWFF3033: Financial Market and Institutions Assignment, UUM, Malaysia As an individual investor in Malaysia, you believe the main index of the Malaysia stock market, FBM KLCI would decline further in the year 2022
| University | Universiti Utara Malaysia (UUM) |
| Subject | BWFF3033: Financial Market and Institutions |
Questions
1) As an individual investor in Malaysia, you believe the main index of the Malaysia stock market, FBM KLCI would decline further in the year 2022. The FTSE Bursa Malaysia KLCI comprises the largest 30 companies listed on the Main Board by full market capitalization that meet the eligibility requirements of the FTSE Bursa Malaysia Ground Rules. Given your strong belief in that market trend, you aim to make a significant capital gain from the financial exchanges in Malaysia. Based on this module content outline, suggest TWO (2) suitable financial instruments (ie any specific equity-based, debt-based or neither debt-based nor equity-based financial instruments) and explain in detail how you would apply that financial instruments in order to meet your objective effectively and efficiently.
2) Recently, your friend who owns a multinational corporation in Malaysia has just bought fabrics from a U.S. company, with a payment of $1 million due in 6 months. Assuming today is 20 April 2022, given the current spot rate (MYR/USD) is MYR/USD 4.3103-221, the six-month forward rate is MYR/USD 4.4252-70. Due to the impact of the Malaysian stock market performance on the value of MYR, you expect the spot rate to reach MYR/USD 4.4340-57 in the coming six months, calculate the implicit gains or losses on this forward position in MYR.
3) Your friend has no investment experience. After completing his studies in investment-related courses, he would like to invest in the financial exchanges in Malaysia. Due to having no real investment experience, he prefers certainty. Hence, he would not mind receiving low levels of return at the beginning of the holding period of that instrument. With his investment knowledge plus determination, he is confident that within a holding period of no longer than ONE (1) year, the stock market in Malaysia would enter into a bull run. He would then be ready and able to bear the higher risk and achieve his investment goal of making higher capital gains. Based on this module content outline and given this information, recommend to him a financial instrument for investment that is most suitable to his needs and explain its suitability.
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