SGX board lot cut: What are the stocks made more accessible to investors?

[SINGAPORE] The Singapore Exchange (SGX) on Wednesday (Nov 19) unveiled two key changes in hopes to boost investor participation, attract unicorns and boost stock market liquidity.

The first key change was the proposal of an SGX-Nasdaq dual-listing bridge, where companies with market values above S$2 billion will be able to list on both bourses using just one prospectus.

This will differ from existing dual-listing arrangements, which require one set of documents per bourse.

Chee Hong Tat, the Minister for National Development Minister and MAS review group chair said the bridge will “enable issuers and investors alike to access liquidity simultaneously across both markets”.

At the same time, the SGX also announced its intention to reduce its board-lot size from 100 units down to 10 units for securities priced above S$10.

A board lot is a standardised number of units of a company offered as a trading block. The unit could be shares for a normal company or stapled securities for a real estate investment trust (Reit).

The change will apply to ordinary shares, real estate investment trusts, business trusts, company warrants, rights and depository receipts. Its aim, like the dual-listing bridge, is to reduce friction and increase the attractiveness of Singapore’s equities market.

As a result, the minimum investment into DBS will drop from about S$5,300 to about S$530.

But what does this new initiative mean for investors exactly? The Business Times speaks to industry players to find out.

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What are the stocks that qualify for reduction of board lots?

Currently, around 13 securities are listed on the SGX that are more than S$10. These include the three banks DBS, UOB and OCBC, and other blue chips such as Keppel.

They represent around 40 per cent of the total market capitalisation of listed stocks.

This is the list, applicable as of the end of October, according to SGX.

What investors need to know on the SGX-Nasdaq dual-listing bridge

The dual listing framework is also meant to drive liquidity by enabling continuous trading across time zones. 

However, investors are somewhat limited by the boundaries of this framework: they will only be able to trade Singapore and US securities that apply to be dual listed under this  framework.

There are some Singapore companies listed on the Nasdaq. These include Grab, Sea and Ohmyhome.

Impact on companies, SGX

“At first glance, these changes seem minimal,” said Morningstar equity analyst Roy Van Keulen, pointing out that existing Singaporean companies listed on the Nasdaq will have little reason to dual list.

However, he stated that new Singaporean companies looking to secure larger liquidity pools around initial public offerings will likely find the bridge “more attractive”.

He added that the benefit to the SGX will be the prevention of a complete loss of trading revenue to foreign exchanges, especially for fast-growing technology companies that would otherwise prefer to list overseas if forced to choose between one exchange over the other.

Fullerton Fund Management’s chief executive Jenny Sofian said she expects the bridge to “attract greater participation from local and regional asset managers, as well as institutional and retail investors”.

This, she added, will “further enrich” the depth and dynamism of the Singapore equities market.

Despite the benefits, Van Keulen cautioned that the change will likely have a minimal impact on trading volumes.

“At the very small end of trading demand, there may be some change, but on the overall level, it’s typically not very noticeable,” he said.