Standard Chartered, The Magical 100 Units Per Lot, And Zombies
The recent scare, drama and overall investor panic which occurred when Standard Chartered announced that they were closing their equities business led to some investors who were spooked to liquidate their holdings, and I believe several of them (including me) made calls to other licensed brokerages in Singapore to transfer their US shares to. Thankfully, on closer inspection, the keyword was “institutional”, and that means corporate business. Thus, in theory, from their announcement, the closure should not affect us retail investors. Information gathered from the news was unclear at first, but now with the announcement on Standard Chartered’s online banking page, everything has been cleared up, and it is – quite certainly – business as usual.
Related to this matter is SGX’s mandate to reduce board lot size from 1000 units to 100 per lot size on the 19th of January. An interesting point to take note which most people missed out is that stocks which have lot sizes of more than 100 units per lot will be consolidated to trade in units of 100. This means that stocks like SBS Transit which is traded in lots of 500 units will be consolidated into lots of 100 units. With the consolidation comes price changes as well, such as the legendary Jardine C&C with a whopping price of about $39K at this point in writing can be bought for a less insane price of about $3.9K. Also, for ETFs, ADRs, bonds and preference shares, they will remain at 1000 units per lot, except for the SPDR STI ETF and ABG Singapore Bond Fund.
With less than 1 week to go, I would think that the local brokerages are stuck in some kind of a rut – if they reduce the commissions, they can’t make money from trades, but if they don’t, people will go to Standard Chartered. I do hope Standard Chartered eats into their pie and make a run for their money, as investing $100 into a $1 stock incurrs a 25% fee through their trading platform (outside of Standard Chartered) makes no sense for the vast majority of retail investors – at that rate, we might as well go with the Blue Chip Investment Plan from OCBC, or the Share Builder Plan from POEMS. However, we still have some time before the 19th, so we have yet to see the brokers take action. Most likely, the fees will only be revised after one or two quarters.
Finally, with the 100 units per lot size, I am expecting hoards of “zombie investors” (i.e. young adults, aunties and uncles who have limited financial education) who will jump into the market due to this, and trading volume will pick up. Prices shouldn’t fluctuate too much for blue chips, but I’m predicting that penny stocks would be the most affected by this. At this point in time, it is the calm before the storm, and I expect some short-term losses on my portfolio, but overall it should balance out once the initial “zerg rush” is over.