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Retail Investors in Singapore Are Taking Advantage of the Smaller Board Lot Size

The start of a new era for retail investors in Singapore had kicked off in earnest on Monday.

Stock exchange operator Singapore Exchange Limited (SGX: S68) had reported an increase in retail trading volume in high-priced shares yesterday, when the board lot size was reduced from 1,000 shares to 100 shares.

As of Monday, there were eight companies within the Straits Times Index’s (SGX: ^STI) 30 components that were carrying share prices of more than S$10. And according to Singapore Exchange’s announcement yesterday, roughly 70% of the orders for those eight companies were for less than 1,000 shares each.

In comparison, an average of 51% of trades for that group of eight between the months of October and December 2014 were for a minimum of 1,000 shares each.

The announcement also pointed out the following: Companies such as Keppel Corporation Limited (SGX: BN4)DBS Group Holdings Ltd (SGX: D05)Jardine Matheson Holdings Limited (SGX: J36)Jardine Strategic Holdings Limited (SGX: J37), and United Overseas Bank Ltd (SGX: U11) were the ones that had the most orders below 1,000 shares, according to brokers which focus on retail investors in Singapore.

These five shares all carry high share prices, with Keppel Corporation having the lowest price at S$8.17 as of Monday’s close.

Although these data only pertain to the first day of trading with the new lot size in place, it is still an encouraging sign to see that retail investors are taking advantage of the new smaller lot sizes to get access to some of Singapore’s blue chips.

A Fool’s take

Singapore Exchange had likely proposed the reduction in the board lot size partly as a way for the company to boost trading activity in Singapore’s retail investor market. But, it seems that retail investors will benefit from the lot size change a lot more than the company would.

For retail investors (like you and me), we can get access to a wider selection of stocks to choose from when investing. Furthermore, it allows us to better size our investments without being forced to become too concentrated in high-priced stocks.

As for Singapore Exchange, it might not be able to enjoy any significant positive impacts. That’s because the trades made with the new lot size changes are mainly for small-quantity trades. As the company’s revenue is correlated with the total volume and dollar amount of trades made in the stock exchange, the addition of small-quantity trades might not move the needle much.

For more investing analyses and important updates about the stock market, sign up to The Motley Fool Singapore's free weekly investing newsletter, Take Stock Singapore. Written by David Kuo, it can help you grow your wealth in the years ahead.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim owns Keppel Corporation