Mastering Global Stock Trading Rules: A Detailed Explanation of Trading Unit Differences in US, Taiwan, and Hong Kong Stocks

Investors often face the primary question when entering the stock market: Why do trading costs in the Taiwan stock market seem so much higher than those in the US stock market for the same stock? The fundamental reason for this phenomenon lies in the significant differences in trading unit settings across markets. This article will delve into the basic rules of stock trading to help investors understand core concepts like how many shares are in one lot.

Definition of Stock Price and Currency Units

The stock price is the amount investors need to pay to acquire a share, representing the real-time transaction price per unit of stock in the market. Stock prices fluctuate continuously based on matching trades between buyers and sellers.

It is important to note that different stock markets around the world use their own currency units. The US stock market prices stocks in USD, the Hong Kong stock market in HKD, and the Taiwan stock market in NTD. For example, TSMC’s stock price in the Taiwan market has reached 561 NTD.

Meaning of One Share and Price Determination

To understand the basics of stock trading, it is first necessary to clarify the definition of “one share.” A listed company is essentially a corporation with shares representing ownership stakes. To raise funds, the company divides its shares into parts for issuance. One share is the smallest trading unit in stock transactions.

Suppose a company’s total capital is 10 million NTD, divided into 1 million shares; then each share has a par value of 10 NTD. Taiwan has long implemented a fixed par value system, with most listed companies’ shares having a par value of 10 NTD, though overseas stocks may have different par values.

It is crucial to emphasize that there is a fundamental difference between par value and stock price. Par value is only used to record the original capital contribution of shareholders, while the stock price is jointly determined by the company’s profitability and investors’ expectations. When investors are optimistic about a company’s prospects, the stock price will keep rising. Therefore, to find out how much a share is worth, you should directly check the current market price.

Case Study Analysis

Taking Tesla (TSLA) in the US stock market as an example, on August 2, 2023, one share of Tesla was priced at $254.11. On January 6 of the same year, one share was only $101.81. In just seven months, the stock price increased by over 150%, fully reflecting the dynamic nature of stock prices.

In the Taiwan stock market, for example, Taiwan Cement (1101.TW) was priced at 32.10 NTD per share as of April 30, 2024. Investors can view the latest quotes through real-time market data.

Meaning of One Lot and How Many Shares Are in One Lot?

Different countries’ stock markets adopt different trading unit standards:

US Stock Market Trading Unit: The basic trading unit is 1 share. Investors can buy any quantity of shares flexibly, with a minimum of just 1 share. This makes the US market relatively friendly to small investors.

Taiwan Stock Market Trading Unit: Uses “one lot” as the basic trading unit. One lot equals 1000 shares, meaning that when trading in the Taiwan market, the minimum purchase is 1000 shares. This is the answer to how many shares are in one lot—1000 shares.

Hong Kong Stock Market Trading Unit: Uses “one board lot” as the basic trading unit, but the number of shares per lot is not fixed and varies depending on the stock price. One lot could be 100, 500, 1000, or 2000 shares.

Comparison of Trading Costs Across Markets

Data as of December 23, 2024

Understanding How Trading Units Affect Investment Decisions

The US stock market’s very low trading unit setting (1 share) allows investors to flexibly allocate positions based on their capital, lowering the entry barrier. In contrast, Taiwan and Hong Kong markets, which use whole lots or board lots, require investors to prepare more capital to complete a trade.

For investors with limited funds, choosing which market to trade in must consider this factor carefully. The concept of how many shares are in one lot directly impacts the investor’s actual costs and capital flexibility. Understanding this is crucial for developing effective investment strategies.

By deeply understanding the trading rules and unit differences across markets, investors can make more rational trading decisions and avoid unnecessary losses caused by misunderstandings of the rules.