Smaller board lots a draw for young investors: SGX

SINGAPORE — The number of young adults opening Central Depository (CDP) accounts has surged over the last several years and the Singapore Exchange (SGX) hopes its move to reduce board lot sizes to 100 shares from the current 1,000 shares will capture this investor segment and help to revitalise the moribund stock market.

SGX executive vice-president Chew Sutat said today (Jan 13) that young adults aged below 25 account for one third of new retail CDP account holders today, up 12 percentage points from 2009. The smaller board lots — effective from Jan 19 — will act as a catalyst to activate this market segment, he added.

For instance, investors will be able to buy the shares of the three largest banks for a minimum investment sum of less than S$5,500 — or S$5,385 — based on the closing prices today of S$23.36, S$20.05 and S$10.04 for UOB, DBS and OCBC, respectively. Without the board lot reduction, the amount would be S$53,850, putting the stocks out of reach for many new investors.

Retail participation reached a high of about 45 per cent in 2013 before dropping to 30 per cent last year. However, this figure could be higher as many are trading online, or through banks, Mr Chew added.

Mr David Gerald, president and chief executive of Securities Investors Association (Singapore), said the board lot size reduction will allow investors to build up a stock portfolio from a young age.

“We know that from our community, retail investors are interested in trading the smaller-capitalisation, lower-priced stocks. Therefore, this initiative is important in supporting the industry,” he said.

“The ones who buy 1,000 shares at a go will continue buying 2,000 or 5,000. For them, it doesn’t matter. What matters are the housewives, the ones who come out of school, the young ones. It gives them an opportunity to start building their portfolios,” he added.

Other stock exchanges that offer board lot sizes of 100 include China and Malaysia, while in the United States, investors can buy a single share.