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Malaysian investors will soon find it easier to purchase shares listed on Singapore Exchange (SGX), following an announcement by the regulator and the Monetary Authority of Singapore (MAS) that the board lot size would be reduced to restore investor confidence and trading volume. Effective January next year, the minimum board lot size will be 100 units, instead of the 1,000 units currently.
As a result of this initiative, it will be more affordable to invest in blue-chips stocks, such as United Overseas Bank or Singapore Airlines. For instance, you will only need S$2,200 (RM 5,627) to acquire one lot, compared with the minimum S$22,000 (RM 56,277) previously.
Edmund Chew, author of a Chinese-language book on creating wealth through the stock market, applauds the move. "There are local investors who see opportunities in the SGX, but find it difficult to invest because of their affordability issue, since it is quite expensive when we convert from the Singaporean dollar to the ringgit.
"Malaysian investors can also ride the political and currency stability enjoyed by Singapore," adds Chew, who is a former remisier." With this move, local investors can start accumulating shares and slowly build their portfolios. The SGX is a good start as it is near to Malaysia, and Malaysians are quite familiar with the issues and economic developments there compared with other countries in the region.
Datuk Dr PHS Lim, the president of the Malaysian Investors' Association (MIA), says the move is good news for small investors. " Yes, it is more affordable for investors who buy shares in Singapore. However , investors here still need evaluate the company's corporate earnings and its fundamentals when they make their investment decisions.
The reduction in board lot size is seen as a move to increase the participation of retail investors, which Lim says may have declined as a result of high valuations in the stock market.
An SGX spokesman said in an email reply that the reduction of board lot size from 1,000 to 100 units will apply to all platform. "However, brokers set their own commission rates, including minimum brokerage fee. Investors are advised to contact their brokers for more information," he says.
Currently, local investors can trade on the SGX through investment banks, such as Maybank, Kim Eng, CIMB, RHB, Kenaga and Affin, via their online trading platforms. With this move, Singapore joins the ranks of Asean stock exchanges, such as Bursa Malaysia and the Stock Exchange of Thailand, which have minimum board lot sizes of 100 units. More details of this initiative is expected to be announced soon.
The SGX and MAS also announced other measures for investors, including the requirement for investors to post a minimum of 5% collateral before trading in stocks and to report aggregate short selling positions on weekly basis to MAS. Currently, investors can trade on the SGX, via contra trading, without putting any collateral. Listed companies will now be required to have a minimum trading price of 20 Singapore cents each. There is currently no minimum trading price imposed.
source from personal money magazine september edition 2014
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