Why It Matters

Welcome break for investors

The lunch break is back on the menu for investors in what some see as a welcome willingness by the Singapore Exchange (SGX) to roll back unpopular changes that did not boost trading volumes much.

The midday break was abolished in March 2011, partly to address gap risk - the danger that traders may be unable to react to major movements in other markets during the break. But scrapping the break irked the trading community, creating a bone of contention with the exchange that has festered for years. Discontent over this will likely end on Nov 13 when the market starts having a break from noon to 1 pm. It will give dealers time to recharge, and, more importantly, allow market players an opportunity to announce any price-sensitive information while trading is on hold.

While the new lunch hour will be half an hour shorter than the old one, it will coincide with breaks in key markets such as Hong Kong and China, helping to mitigate gap risk.

But reinstating the lunch break in itself will probably not boost stock dealing in a big way. More crucial is the SGX's move to boost retail interest by requiring new mainboard listings to allocate at least 5 per cent, or $50 million, whichever is lower, of initial public offerings for public subscription.

In addition, Nov 13 will mark the introduction of a wider bid-offer spread for stocks priced between $1 and $1.99. The bid offer spread will rise from 0.5 cent to one cent. So an investor buying a share in this price range will have to lodge bids at intervals of one cent instead of 0.5 cent. The move is aimed at luring back short-term traders who want to flip their positions as quickly as possible but need the wider spread to cover their trading costs.

This is welcomed by the trading community, but some want the SGX to go further by including stocks that trade from 50 cents to $1 because most speculative plays are in stocks in this price range.

Hopefully, these initiatives will help add momentum to the local market rally at a time when retail interest is improving and corporate earnings in certain sectors seem to be on the mend.

A version of this article appeared in the print edition of The Straits Times on July 25, 2017, with the headline 'Welcome break for investors'. Print Edition | Subscribe