Brokers expect HSBC Holdings, a staple in the portfolios of Hongkongers, to see a large increase in interest from both local and international investors, as the stock’s minimum trading unit is set to change as part of the stock exchange’s board-lot reform process.
Investors have long sought the change for the stock – known as a “widow and orphan” stock, as it pays a high dividend while bearing low risk – because its 400-share lot put it out of reach for many. At that level, retail investors had to spend at least HK$61,600 (US$7,887) to buy HSBC, based on its closing price of HK$154 on Friday.
Now, under board lot reform recently introduced by bourse operator Hong Kong Exchanges and Clearing (HKEX), the biggest lender in Hong Kong and Europe is preparing to change its board lot size for the first time in decades.
“This will be a good move for HSBC, as whenever a company reduces the lot size and hence cuts down the minimum investment threshold, more investors can afford to invest in the stock,” said Kenny Tang Sing-hing, chairman of the Hong Kong Institute of Financial Analysts and Professional Commentators. “This is expected to increase HSBC’s turnover.”
Under the first phase of the reform, which took effect on July 2, newly listed companies must choose one of eight board lot units: one, 50, 100, 500, 1,000, 2,000, 5,000, or 10,000 shares. The exchange’s 2,700 listed companies, including HSBC, will need to consolidate their lot sizes from more than 40 now to the same eight sizes, and must do so within six months after they enter into the Securities and Futures Commission’s (SFC’s) scripless scheme.
The SFC scheme will allow five years for all existing companies to turn physical share certificates into a digital format starting from November this year.
HKEX also added a ceiling of HK$50,000 per lot for companies whose trading unit is higher than 100 shares.