As of May 2, 2016 tomorrow (this post was written on May 1, 2016) something will be different from the share price fraction in the capital market. What's different?
The price fraction on the IDX will soon be revised to a new price fraction. If the old price fraction only has 3 price fractions, then this new price fraction will change to 5 price fractions. The regulation regarding the new price fraction has actually been discussed for a long time and the rumors about this regulation have been discussed for a long time. Lots of pros and cons? Which one are you, pro or con?
So before going into the main discussion in this post, it's a good idea to know about price fractions first. Please read the post again: Small Vs Large Price Fraction, Which is Faster Profit? So, what is the difference between the rules for the old price fraction and the new price fraction starting in 2016? Let's look at the table below.
The old price fraction rules from the IDX are divided into 3 price fractions as follows:
Meanwhile, the new price fraction rules from the IDX which will be implemented as of May 2, 2016 are divided into 5 price fractions as follows:
The difference now is in the new price fraction, there is an additional price fraction of Rp. 2 for the 200-500 fraction. In the old faction, the share price of 200-500 fractions is still priced at Rp1. The second difference is that there is a price fraction of Rp.10 for stock prices that are in the range of 2,000-5,000. In the old price fraction, the price of 2,000-5,000 shares was only valued at Rp5.
So, this new price fraction essentially widens the price range. So, if you look at the price fraction, which was initially Rp. 1, it becomes Rp. 2, then the price fraction is Rp. 5, then there is an additional price fraction of Rp. 10, then I am sure you can already guess what the IDX's goal in setting this new price fraction is.
The question is: Is the new price fraction really getting faster for investors? In fact, in addition to increasing liquidity, the increase in stock prices that are faster than before should also be watched out for, because the actions of speculators or what we call dealers can lure retail investors who only have limited funds.
Fried stocks will rise faster with the new price fraction. Moreover, usually, fried stocks range in price between Rp. 200-Rp. 500, the price fraction is Rp. 2 (previously Rp. 1). If you are not careful in selecting stocks, just follow the "wind direction", do not rule out the possibility of new price fractions, it will accelerate our capital market to become a place for speculators, not a promising stock business place. In the end, the capital market will give the impression of gambling.
Lessons that can be learned from me as well as you as a retail investor, which in fact is the general public: With the new price fraction later, which allows stock prices to rise more quickly, don't be carried away by market euphoria too quickly. A rapid increase in stock prices will actually have a bad psychological impact if it is not balanced with each investor's trading planning. Do not let because of the new price fraction, investors' capital will actually be eroded.
As investors and traders, we must still be able to balance the euphoric situation that may occur with this new price fraction, by selecting good stocks based on factual analysis. Also read: Market Psychology: Four Important Stages.
Then how is the practice of this new share price fraction in our capital market? Will the JCI fall further or will it accelerate? Of course I will discuss in the next post after the next few months this price fraction has been assigned to the stock market (not published yet.. coming soon).
