26 August 2014

SGX - Board Lot Size Reduced to 100 Units Starting 19 January 2015

Starting from 19th Jan ’15, SGX will reduce the standard board lot size of securities listed on SGX from 1,000 to 100 units, making it more affordable for retail investors to invest in a wider range of equities, including blue chips, and enable them to build more balanced and diversified portfolios. The reduction will apply to ordinary shares, including shares traded on GlobalQuote, REITS and business trusts, company warrants, structured warrants and extended settlement contracts. Existing counters with board lot sizes of 100 or less units will remain unchanged.

The reduced board lot size will benefit all investors and make it easier to invest in blue chips and index component stocks which tend to be higher-priced. It will also allow institutional investors to better manage their risk exposures through finer asset allocation of funds.

Board lot sizes for exchange traded funds, American Depositary Receipts and fixed income instruments, including retail bonds, Singapore Government Securities and preference shares will remain unchanged.

In light of the changes, SGX aims to implement a minimum subscription and allocation of $500 for mainboard counters and $200 for Catalist counters, on investors applying for shares during the a company’s IPO period.

SGX currently trades at 22.5x forward P/E.

My Notes

If you look at Bursa volume vs SGX volume, you may notice that SGX volume is not high compared to its neighbor. There are a lot of reasons here, such as Singapore is now experiencing transition period to reduce its reliance on labor intensified industries and the government aim for sustainable yet lower GDP growth compared to Malaysia. Another reason could be the introduction of smaller unit of board loat size of securities listed on Bursa. 

If you are young investors age range 20 years old to 30 years old, the chances of you to own DBS/OCBC/UOB is lower as it requires you to have at least S$10K to own just one piece of a bank counter, and you will loss opportunity cost to diversify your stock portfolio. Some good companies such as Jardine related companies require even near to S$50K to own just 1 lot of the counter. 

With introduction of smaller board lot size, I believe that it provides opportunity to the young and enthusiastic investor to create their own stock portfolio, besides parking their excess money on unit trust. This may increase overall portfolio performance if you are able to perform right choices on both diversification and stock picking at the right time.

For those who have odd lots of more than 100 shares may also be easier to liquidate or top up their shares starting next year, as the board lot size is reduced to 100 shares. It will also reduce the transaction cost for those who have little invested capital. 

Hopefully with this implementation, SGX trading volume would slowly pick up next year. 

No comments:

Post a Comment

Related Posts Plugin for WordPress, Blogger...

View All My Posts Here