How to Start Buying Shares in Singapore

Investing in the Singapore stock market offers portfolio diversification and potential growth. Singapore is a robust financial hub with a stable regulatory framework, providing a stable environment for investors. The market is known for attractive dividend yields and a favorable tax regime for stock investments. Dividends are typically tax-exempt, and there are generally no capital gains taxes on stock investments held for more than a year.

Opening Investment Accounts

To buy shares in Singapore, two primary accounts are required: a Central Depository (CDP) account and a brokerage account. These accounts facilitate trading and hold securities. Obtaining both is a foundational step for engaging with the Singapore Exchange (SGX).

The Central Depository (CDP) account, managed by the Singapore Exchange, functions as a centralized platform for clearing, settlement, and safekeeping of Singapore-listed securities, including stocks, bonds, and unit trusts. To open a CDP account, an applicant must be at least 18 years old and not an undischarged bankrupt. A Singapore bank account from a designated bank (including DBS/POSB, OCBC, Citibank, HSBC, Maybank, UOB, or Standard Chartered Bank) is also required for Direct Crediting Service for dividend payouts.

For non-Singapore citizens or permanent residents, the application requires a valid passport and work pass. One secondary supporting document (e.g., bank statement from an MAS-licensed bank, CPF statement, or IRAS statement) dated within three months is necessary to verify residential address. A scanned copy of the applicant’s signature and their Tax Identification Number (TIN) are mandatory. United States tax residents must provide a completed Form W-9. Applications can be submitted online via the SGX website, with processing times ranging from 5 to 10 business days.

A brokerage account serves as the platform for executing trades. Brokerage firms in Singapore offer various options, including traditional services and online trading platforms. These firms operate either on a CDP-linked model, where shares are held directly in the investor’s CDP account, or a custodian model, where the brokerage holds shares on the investor’s behalf.

Opening a brokerage account requires the applicant to be at least 18 years old. Required documentation includes an identification document (e.g., passport), proof of address, and sometimes proof of income. Most brokerage firms facilitate online applications, and some permit remote account opening for international clients. It is essential to link the brokerage account to the CDP account to trade SGX-listed securities.

Placing Your First Trade

After opening and linking both a CDP and brokerage account, an investor can place a trade. The process begins by logging into the chosen brokerage’s online trading platform or contacting their broker. Investors locate the desired stock by entering the company name or stock code into the platform’s search function.

Once identified, select the “buy” option and specify the quantity of shares to purchase. The platform prompts the selection of an order type, which determines how the trade is executed. Two common order types for beginner investors are market orders and limit orders.

A market order is an instruction to buy or sell shares immediately at the best available market price. This order type prioritizes execution speed, ensuring swift completion, but it does not guarantee a specific execution price. Market orders are suitable for highly liquid stocks with minimal price fluctuations, or when immediate execution is paramount.

Alternatively, a limit order allows an investor to specify a maximum price for buying or a minimum price for selling. This order type guarantees the price if executed, but it does not guarantee execution at all, as the market price must reach or surpass the specified limit. Limit orders can be set as “Good-Till-Cancelled” (GTC), remaining active until filled or cancelled, or “Good-Till-Date” (GTD), active until a specified expiry date. After confirming order details, the investor submits the trade. The platform provides an order confirmation and status updates.

Understanding Trading Costs

When buying shares in Singapore, investors incur various fees and charges beyond the share price. These costs include brokerage commissions, clearing fees, and Goods and Services Tax (GST).

Brokerage commissions are charged by the firm for facilitating the trade. These commissions vary, typically ranging from 0.03% to 0.28% of the contract value. Many brokerages impose a minimum commission fee per transaction, ranging from S$12 to S$40 for CDP-linked accounts. Some firms offer tiered commission structures, where higher trading volumes or account tiers may qualify for lower rates or free trades.

A clearing fee of 0.0325% of the contract value is levied on all trades. A Singapore Exchange (SGX) trading fee of 0.0075% of the traded value is also applied. These exchange-related fees are standard across all brokerages.

Goods and Services Tax (GST) is applied to most charges. The prevailing GST rate (currently 9%) is charged on brokerage commissions, clearing fees, SGX trading fees, and any other applicable settlement fees. Some brokerage firms may impose other charges like platform or custody fees, though certain conditions (e.g., active trading or specific account tiers) can lead to waivers.

After the Trade: Settlement and Custody

Once a trade is executed, the process moves into settlement and custody, finalizing the transaction and determining how purchased shares are held. These steps ensure proper transfer of ownership and funds.

The settlement process in Singapore operates on a T+2 cycle, meaning the official exchange of shares and cash occurs two business days after the trade date. For instance, a trade executed on a Monday would settle on Wednesday, provided no public holidays intervene. This standardized period aligns Singapore’s market with global practices, facilitating efficient transfer of assets and money. Simultaneous settlement of securities and money helps reduce post-trade risks.

Shares purchased on the Singapore Exchange are primarily held in one of two ways. If the investor has a Central Depository (CDP) account, shares are held directly in their name, establishing them as the legal owner. This direct ownership provides entitlements such as voting rights, attending Annual General Meetings (AGMs), and direct receipt of corporate action notifications. All SGX-listed securities are held within the CDP system.

Alternatively, some brokerage firms offer custodian accounts (nominee accounts), where the brokerage holds shares on behalf of the investor. In this arrangement, legal ownership rests with the brokerage, acting as a nominee.

While convenient, custodian accounts may not provide the same direct shareholder rights as a CDP account. Corporate actions (e.g., dividend distribution, rights issues, bonus issues) are communicated to CDP account holders, allowing direct participation. Dividends can be received in cash or as additional shares.