Muted response to smaller board lot sizes on SGX

SINGAPORE — The stock market did not get much of a lift yesterday on the first day of trading with reduced board lot sizes, but the Singapore Exchange (SGX) said the response from retail investors was encouraging, given that volume was affected by the Martin Luther King holiday in the United States.

The benchmark Straits Times Index (STI) rose 0.2 per cent to close at 3,307.72 yesterday, but in the broad market, only about 1.2 billion shares worth a little less than S$900 million were traded, down sharply from last Friday when about 1.8 billion shares worth about S$1.4 billion changed hands.

Effective yesterday, board lot sizes were reduced to 100 shares from 1,000 in a move that the SGX hopes will benefit retail investors as individuals would find it easier to invest in higher-priced blue-chip shares instead of limiting themselves to lower-priced ones.

The reduced lot size would, therefore, enable retail investors to build balanced and diversified portfolios more easily to grow their savings.

However, brokers and remisiers said orders in smaller lots were few and far between throughout yesterday’s trading session.

“I think it is good proof that lot sizes do not affect the propensity to invest. If the 100-share hypothesis is correct, then we would have seen a significant increase in trade,” said Mr Roger Tan, chief executive of Voyage Research, who noted that yesterday’s volume was below last year’s daily average of two billion shares valued at S$1.05 billion.

Mr Jimmy Ho, president of the Society of Remisiers, said: “We saw some orders in smaller lots, but overall not much. I think one reason for that could be the absence of investors. The market has been quiet and if people are not in it, such a change won’t have any impact.”

In a statement issued after trading hours yesterday, Ms Jenny Chiam, head of securities at SGX, said: “The activity in the Singapore stock market today has been encouraging, suggesting that retail investors have leveraged the 100-share board lots to access higher-priced stocks. In addition, although it is a holiday in the US markets today, our turnover grew 4 per cent compared with the same holiday a year earlier.”

The SGX said 70 per cent of the orders for eight STI component stocks priced above S$10 each were of 1,000 shares and below, compared with the period between October and December last year when these stocks had an average 51 per cent of orders for the minimum 1,000-share lot. The bourse operator added that the stocks that had the most orders below 1,000 shares yesterday included Keppel Corp, DBS, Jardine Matheson Holdings, Jardine Strategic Holdings and UOB.

Mr Raymond Chee, managing director of OCBC Securities, said an improvement in market sentiment could spur more retail investors to take advantage of the smaller lot sizes to invest in shares on the SGX.

“We saw some investor participation in reduced lot sizes today, though the volume of such trades was not significant as yet. In time, as investors get familiarised with the change, we are more likely to see a greater take-up, particularly if there is an improvement in the overall market sentiment.”