Wednesday, August 21, 2013

SGX to reduce lot size potentially from 1000 to 100 to 1

SGX has announced that they are studying to reduce its lot size from the current 1000 to 100 and eventually to 1. So imagine if that were to happen, I would have owned 260 lots of FCT instead of the 26 lots I owned now :D

I think we might get a general consensus from the retail investors that they are generally favorable to this changes. This is because not only can they average down in lower amounts but for the younger investors who are interested to start in investing, this will be a good learning tools for them as they do not need to put down much capital to start with. For me personally, it will be good as well as it allows me to get access to expensive stocks in the market like the Dairy Farm, HK Land, Jardine and the banks. So instead of having to pay S$49,000 for a single lot for Jardine, I will only need to pay down S$4,900 for it.

However, is there a need to bring the lots to 1 share? I think this will increase market volatility in the market like what we've seen in the HK and US market as we will see a lot of short-term investors now entering the markets. The cost of information for the company will also increase as a result of this move. Imagine a person having to pay S$4 for a single share of Starhub. From the company's point of view, that person with the single share will still be considered a shareholder and will be eligible to vote in the AGM. Hence, from the company's point of view, it is not advantageous for this to happen.

Well, we will never know when will this happens. My view is probably that this will not happen and they are only at the beginning stage of consideration. When it does, I am sure there will be more costs involved that will outweigh the benefits.


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