Investing in pricey blue chip stocks will become more affordable next week with the introduction of smaller lot sizes.
But remisiers and analysts do not anticipate an immediate surge of investor interest and trading volumes on the Singapore Exchange (SGX).
The SGX's reduction of minimum lot sizes from 1,000 shares to 100 shares means component stocks of the Straits Times Index (STI) such as DBS Group Holdings, United Overseas Bank (UOB) and Singapore Airlines will come within reach for more retail investors.
The reduction in lot sizes - the minimum multiple in which shares can be traded - applies to shares outside the STI too.
Buying a lot of DBS shares next Monday, for instance, will cost $1,981 based on yesterday's closing price, just one-tenth of the $19,810 a 1,000-share lot would require.
But market observers The Straits Times talked to have yet to detect strong market interest in the move, nor do they advise to load up on blue chips to reap short-term gains.
"So far, there has been little to suggest people are taking up positions in advance, and momentum is likely to continue to be influenced by wider global market sentiment," IG market strategist Ryan Huang said.
He cited STI's 1.14 per cent drop yesterday after the Swiss National Bank's move to cut the currency cap on the franc sent Wall Street tumbling on Thursday.
Some of the higher-priced blue chip stocks had an uneven week.
Singapore Airlines closed at a year-to-date high of $12.50 on Monday, before dropping through the week to close at $12.11 yesterday, while DBS also dropped 1.59 per cent for the week to $19.81, and UOB dipped 1.45 per cent over the same period to $23.04.
HongKong Land and Jardine Matheson Holdings, however, continued their recent hot streak, with HongKong Land up 1.35 per cent for the week to US$7.50 (S$10), while Jardine Matheson jumped 2.46 per cent to US$62.50 at yesterday's close. Their intra-day surge yesterday drew trade-with-caution notices from SGX.
Mr Huang said the two counters were probably lifted by property sector euphoria after Mr Li Ka Shing's move to restructure his business empire, instead of anticipation by retail investors.
"It's hard to say whether blue chips will see any upside next week - in fact, I won't rule out a flat week with what's happening around the world," he said.
Mr Desmond Leong, a remisier at Phillip Securities, has also not detected any increased interest over the past week.
Any potential upswing next week in blue chips trading will be minimal, he said.
"If anything, it'd likely be a 1 per cent to 2 per cent jump in volume, as I believe investors are still taking a wait-and-see attitude. But with the smaller lot size, there're definitely opportunities to take up positions on some counters, including those outside of STI.
"Several small and mid-cap stocks are currently trading at depressed valuations. I would keep an eye on some logistics plays, such as SingPost, Vibrant Group and CWT, for instance. The oil price slump also makes transport companies such as Singapore Airlines and ComfortDelGro worth a look," Mr Leong said.
First announced in August last year, the introduction of a smaller lot size is aimed at lowering the barrier for more retail and new investors to enter the market.
This is a top priority for SGX, where average daily turnover saw a 25 per cent drop last year. Retail investors currently account for around 30 per cent to 35 per cent of the bourse's daily turnover.
But Voyage Research investment analyst Phuah Keng Keat said the move is not likely to lead to any significant boost, especially not for the STI, where institutional players still drive the bulk of trading.
"More importantly, because transaction fees remain the same, retail investors must be aware that a smaller board-lot size doesn't mean trading opportunities.
"By my calculation, any transaction below $5,000 will struggle to break even."
A commission fee ranging generally from 0.24 per cent to 0.35 per cent per transaction is charged by brokers. SGX currently has no plans to regulate market fees, its executive vice-president Chew Sutat said recently.
Mr Phuah stressed that commission fees need to be reduced, or at least adjusted to be proportionate to the 100-share lots, if the reduction in board-lot size is to achieve its intended goal.
"Nonetheless, if you're looking more at the long term, now you definitely have a chance to start slowly accumulating blue chips, especially in the resilient banking sector."
This article was first published on January 17, 2015.
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