Looking to jump into the stock market? Trading is now easier with the SGX lot size change. Find out what this means for you.
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When the SGX first announced in August 2014 that they would be reducing the standard board lot size of securities listed on the exchange from 1,000 to 100 units, many institutional and retail investors, including us, rubbed our hands in glee. We circled 19 January 2015 on our calendars, marking it as a day of many possible new financial milestones for our country – more and more Singaporeans would hopefully take charge of their retirement, learn the importance of investing to secure their financial future, etc.
President and CEO of Securities Investors Association (Singapore) David Gerald said in a press release that he hopes the move would “encourage retail investors to seriously consider share investing as a way to diversify their portfolio and grow their savings for retirement”.
That day has come and gone, and while trading volume on SGX was strangely muted on the first day, we predict that more and more new small-time retail investors will enter the market as Singaporeans increasingly take charge of their own personal finances and retirement plans. In the meantime, as the market gradually warms up to the change, here are four reasons why you should be jumping on the bandwagon as quickly as possible before the rest start to understand the intricacies behind the SGX lot size change.
With more investors in the market, you can expect the valuation of companies to more accurately reflect market sentiments. While an influx of investors can theoretically result in more bubbles (new and inexperienced retail investors might follow the herd and blindly purchase flavours of the month), on the flipside, it also means that there will be other retail investors who will have done their homework and invest in companies with solid fundamentals. This should lead to…
The penny stock scandal that broke out in late 2013 discouraged many retail investors from venturing into the Singapore stock market, which explained the rather thin trading volumes last year. However, the bourse operator recently reported that trading volume has been experiencing an uptick in the past 60 days, as more and more investors shake off the bad billion-dollar-loss memories. And now, with lower financial barriers of entry for folks looking to trade on the stock market, all signs point to increased trading volumes as more stocks and money exchange hands. What does this mean? Well, it means that it’s…
With more people on the market, investors, especially those holding pricier blue chip stocks, who are looking to sell their shares will have an easier time finding buyers. On the flipside, it also means that buyers will have an easier time finding sellers who are willing to let go of the stock at their desired price. Those who possess odd lots i.e. 100 shares and above are also able to sell these stocks on the regular market instead of at a discounted value at the odd-lot market. With more shares available on the regular market, trading volumes will, you guessed it, increase.
With the potential increase in trading volume, we do have one wish though, and that is…
While the SGX lot size change is great news for small-time retail investors, it would be all for naught if the trading commission fees charged by stock brokerages chomps on a huge chunk of their profits. A lot of 100 shares is especially susceptible as that means that a higher percentage of the sale goes into pockets that don’t belong to us. So, we’re glad to see PhillipCapital leading the way by introducing promotional commission rates. The finance giant is charging S$10 for any orders worth less than S$3,500, and S$25 for orders exceeding that amount. These charges only apply to online orders that are less than 1,000 shares.
We’re keeping our fingers crossed that other local brokerage firms will follow PhillipCapital’s lead and introduce competitive charges to entice more investors to finally dip their toes into the Singapore stock market.
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