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With smaller SGX board lots, guards against gambling mentality needed

Singapore Exchange board lot sizes have been reduced to 100 shares from 1,000. (“Muted response to smaller board lot sizes on SGX; Jan 20, “Smaller board lots a draw for young investors: SGX”; Jan 14)

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Woon Wee Min

Singapore Exchange board lot sizes have been reduced to 100 shares from 1,000. (“Muted response to smaller board lot sizes on SGX; Jan 20, “Smaller board lots a draw for young investors: SGX”; Jan 14)

This will improve market liquidity, particularly for blue-chip shares, which have hitherto been unaffordable for average retail investors due to the old lot size.

Since the investment outlay is now a tenth of what it was, could this potentially lead to a short-term investing mentality among this group, especially the naive young, who will jump onto the blue-chip bandwagon?

Chances are that average retail investors would be more prepared to lose money in the stock market over a quick punt, which is essentially not unlike gambling.

That the affordability of reduced lot sizes would enable balanced, diversified portfolios to be built is also questionable. Retail investors must first have the discipline and ability to conduct reasonable fundamental and technical research, and analyses, on blue-chip companies, and/or have the skills to select stocks whose returns correlate negatively to those they already own.

Are adequate resources and tools on hand for retail investors to do this? Work could probably be done to address these issues.

Improved liquidity and greater affordability for blue chips should not be achieved at the expense of creating what could, arguably, be an environment more conducive to gambling than investing.

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