Singapore’s Stock Exchange Looks to Make Trading More Attractive for Individuals 

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Singapore Exchange Ltd. (SGX) is looking to individual investors to boost Southeast Asia’s biggest stock market after trading volume this year tumbled the most since the 2008 global financial crisis.

The bourse will cut the standard lot size for equity transactions to 100 shares from 1,000 shares on Jan. 19, a move that the Society of Remisiers says will make Singapore stocks more affordable for investors seeking to trade in smaller parcels. The average value of shares traded daily on the exchange tumbled 25 percent to S$1.05 billion ($794 million) this year as investors deserted the market after an unexplained $6.9 billion plunge in the value of three commodity companies over three days in October 2013. Trading volume fell 37 percent in 2008 at the height of the global financial crisis.

“Retail investors had been buying the small caps because they are more affordable, but many have been burnt following the penny-stock crash and have stayed away from the market,” Ernest Lim, a trader with CIMB Securities in Singapore, said by email. “Cutting the board lot size will likely attract such investors back into the market.”

The smaller transaction size was announced by regulators in August as part of efforts to restore market confidence following the penny-stock rout. It means an investor will only have to spend S$2,059 to make a trade in DBS Group Holdings Ltd. at yesterday’s closing price, excluding broker fees, versus S$20,590 under current rules.

The bourse will also impose a minimum trading price of S$0.20 on mainboard shares as low-priced securities are more susceptible to excessive speculation and potential market manipulation, according to the August statement. Investors will be required to lodge collateral worth 5 percent of trades and provide more information about short positions.

Trading Disruptions

While the change is encouraging, some investors could be put off by trading disruptions at SGX in recent months, according to Jason Hughes, head of CMC Markets in Singapore. The bourse opened its securities market 3 1/2 hours late on Dec. 3 because of a software error, less than a month after halting trading for more than two hours on Nov. 5 due to a power-supply failure, triggering a public apology from CEO Magnus Bocker and criticism from the city’s financial regulator.

“The damage from these outages is going to be larger than any benefit from reducing the board lot sizes,” Hughes said. “Given that the outages happened in a short period of time, it certainly had an impact on SGX’s reputation.”

Share Move

SGX shares fell 0.3 percent at the close today in Singapore, paring their gain for 2014 to 7.6 percent. The Bloomberg World Exchanges Index advanced 3.8 percent this year through yesterday. Singapore’s benchmark Straits Times Index rallied 6.2 percent in 2014, while the MSCI Singapore Small Cap Index fell 5.7 percent, declining for a second year.

“Cutting the board lot sizes should help encourage more retail investors to enter the market,” said Jimmy Ho, president of the Society of Remisiers, which represents stockbrokers who work entirely on commissions. “Retail investors can now afford to buy the more expensive blue chip shares, which were previously out of reach for some retail investors. These are more attractive and less risky investments than penny stocks.”

The number of young professionals starting to invest in the stock market has been increasing, Lynn Gaspar, head of retail investors at SGX, said by phone on Dec. 19.

About 29 percent of the 71,000 individuals who opened new trading accounts with the Singapore bourse’s central depository in the past 12 months were people aged 25 years and under, compared with 19 percent three years ago, she said.

The reduction of the minimum board lot “really opens up the market in a big way and allows the average Singaporean to be included,” Gaspar said. “We see more investors moving into the blue chips, both existing and new ones.”

New Investor

One such investor is Michael Thong, a 20-year-old student who has just started his two-year national service with the military. He was accompanied on Dec. 18 by his brother Christopher, a 27 year-old airforce pilot, to open his first stock trading account at Phillip Securities Pte’s branch in the eastern suburb of Marine Parade.

“I have done well in the stock market,” said Christopher Thong, who said he started buying shares 10 years ago with S$3,000 in capital, which has grown to a six-figure sum. “I’m encouraging my brother to get started. He has a lot of time to read up on finance and investing in the army camp.”

Nicholas Wong, who started working as a remisier a year ago with Phillip Securities, Singapore’s largest brokerage by number of clients, said he’s getting more interest from new investors ahead of the change. There were a total 1.66 million trading accounts with the central depository as of the end of November, compared with 1.3 million in 2008, according to SGX data.

“So far, I’ve got a number of retail investors opening new trading accounts, ahead of the reduction in board lot size,” Wong said as he helped a new client fill out documents at the brokerage’s headquarters in the central business district. “This would benefit retail investors with smaller budgets.”

 

Source: Bloomberg – Singapore’s Stock Exchange Looks to Make Trading More Attractive for Individuals

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