The Singapore stock exchange will cut the standard lot size for equity transactions by 90 percent later this month in an attempt to boost trading after volumes in 2014 fell to the lowest level since the financial crisis of 2008.
Singapore Exchange will also take measures to improve retail investors’ access to bonds as part of an ongoing public consultation process meant to stimulate retail investment in the exchange.
The moves are part of a coordinated plan to boost trading after the value of shares traded daily on the exchange plunged 25 percent to S$1.05 bn ($794 mn), according to Bloomberg. The drop in volume came after three commodities companies plunged $6.9 bn in value over a three-day period in October of 2013, the news agency reports. The drop was not explained and jittery investors fled the market.
‘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, tells Bloomberg News. ‘Cutting the board lot size will likely attract such investors back into the market.’
Starting January 19, Singapore Exchange will lower the lot size for equity trades to 100 shares from 1,000 shares. The exchange operator says the change will make it easier for small investors to trade shares in a wider range of equities and help them achieve a more balanced portfolio.
‘The reduced board lot size will benefit all investors and make it easier to invest in blue chips and index component stocks which tend to be higher-priced,’ Singapore Exchange CEO Magnus Bocker said in a press release announcing the move. ‘It will also allow institutional investors to better manage their risk exposures through finer asset allocation of funds.’
