January 16, 2015

Come Monday (19 January), the Singapore Exchange will lower the minimum lot size in the securities market from 1,000 to 100 – in an attempt to attract more retail investors. Using a standard 100 share lot size is not new as countries like Thailand and Malaysia are currently adopting that size of trading board lot.

This new move has been perceived positively by SGX executive vice president Chew Sutat, “We hope the introduction of smaller board lots will help them reach out to investors and encourage them to take full advantage of the many attractive investment opportunities and strong performance of the Singapore market.” Hence, with so much anticipation surrounding this, what does the stock broking community think? I talked to four different individuals about the potential appetites of investors and their willingness to trade more.

1. Loh Hoon Sun, Phillip Securities

Do you think the introduction of small board lots trading will increase investor participation?

Yes, but the increase is not expected to be that significant.

Where will these investors come from: existing, new or both?

Both. Retail investors are now able to buy blue chip stocks of high value with smaller amounts of investment.  For example, 1,000 UOB costs $23,300, whereas 100 UOB costs only $2,330.

If you are dealing with investors now, do you think they will trade in small lots?

Yes. This will give them more flexibility to choose the stocks they like within their budgets.

2. Ellain Tan, Phillip Securities

Do you think the introduction of small board lots trading will increase investor participation?

I believe in the long term, the answer would be a resounding yes.  The increased affordability of the blue chips listed here should give a boost to the current levels of investor participation. However, the effect may not be evident immediately as most people usually take a ”wait and see” approach during periods of change.

Where will these investors come from: existing, new or both?

Both. They could be the financially savvier Singaporean youth of today (students/new working adults) who will have more investment choices with the increased affordability.

If you are dealing with investors now, do you think they will trade in small lots?

I expect the existing investors to trade according to their preferred fund size. Whether or not they trade in small lots will depend on how much funds they are looking to allocate to stocks.

3. E. Chua, OCBC Securities

Do you think the introduction of small board lots trading will increase investor participation?

So far none of the active clients has expressed much interest in 100 shares trade since they will incur minimum brokerage and will not be cost-effective.

Where will these investors come from: existing, new or both?

I think new and young investors may be attracted as it enables them to start investing with smaller capital outlay.

4. Private Investment Advisor

Do you think the introduction of small board lots trading will increase investor participation?

Yes but only a gradual increase as the major driving factor is the upside growth expectation and not the board lot size.

Where will these investors come from: existing, new or both?

More from existing clients who would like to dollar cost averaging down their blue chip holdings amid current uncertainty and a small number of new investors who are financially literate and would use the new affordability for their initial wealth accumulation.

If you are dealing with investors now, do you think they will trade in small lots?

No, for experienced investors who have the risk tolerance and fundamental beliefs. You need to invest with meaningful stakes and stay focused to create an effective portfolio and meet target returns.