Retail investors will be able to buy ‘emperor stocks’ that hover over one million won with the price of a cup of coffee. From the third quarter of next year, trades in decimal points will be allowed.
The Financial Services Commission announced on Sunday that it would allow buying domestic and foreign stocks in decimal points. Trading in decimal points means dividing into multiple pieces for trading.
It is currently applied to foreign stocks in two securities firms including Korea Investment & Securities and Shinhan Investment Corp. Finance authorities plan to build infrastructure in the Korea Securities Depository and allow decimal-point trading of domestic stocks for securities firms that apply for it. For instance, investors will be able to buy 0.01 LG Household & Health Care stock (13,870 won), which is an ‘emperor stock’ that costs 1.387 million won as of Friday.
In principle, decimal-point trading is now allowed as the commercial law stipulates the basic unit of stock trading as one stock. The Financial Services Commission decided to designate it as an innovative finance service, which makes it an exception. It is to expand investment opportunities of small-size investors by lowering the barrier in high-price stocks.
It utilizes trust system. For instance, if two investors respectively buy 0.3 and 0.6 units of a specific stock, a securities firm buys 0.1 unit to make a purchase of one stock. Investors do not get voting rights in this case but can receive dividends. The new system is projected to be introduced in the third quarter of next year.
It is expected to facilitate stock trading as it decreases the minimum trading amount per stock and investors can invest in small amounts. Some anticipate that it would increase stability of portfolios by making it easier to diversify investment. “Small investors can invest more actively than before in blue-chip stocks that are comparatively safer but more expensive, which will increase stability of investment,” said Lee Hyo-sub, director of finance industry division at the Korea Capital Market Institute.