Fees remain a problem even with smaller SGX lot sizes

GETTING retail investors interested in the local stock market through measures like smaller lot sizes is laudable. However, fees remain a problem. And there are bigger issues at stake.

Next week, the Singapore Exchange (SGX) will reduce the standard board lot size of its listed securities from 1,000 units to 100 units. Singapore's blue chips like the local banks and the Jardine conglomerates will be more affordable for local investors. Yield stocks like real estate investment trusts (Reits) could be had for several hundred dollars a pop. The median Singaporean salary is at a few thousand dollars a month. It makes much more sense for the man on the street to buy, say, OCBC Bank using S$1,000 at a time, rather than S$10,000.

However, minimum commissions are S$25 for online trades and S$40 for phone trades. To pay this level of fees for a S$1,000 trade is too much. For a S$1,000 online trade, a S$25 fee for buying and another for selling works out to a 5 per cent cut. By contrast, investors in US stocks pay a maximum of about US$10 per online trade. Even if they buy US$1,000 worth of, say, Apple shares, maximum fees for a two-way transaction are 2 per cent.