Differences in trading logic between Taiwan stocks and US stocks: Why are the buying and selling costs worlds apart?

Many investors who are new to the market often find themselves confused by the differences in quotes between the Taiwan Stock Exchange and the US stock market. The same listed company can have vastly different purchase costs across different markets. The fundamental reason behind this lies in the two major markets adopting completely different trading unit systems.

Trading Unit System Determines Your Entry Cost

The most fundamental difference between the Taiwan stock market and the US stock market is the trading mechanism. The minimum trading unit for Taiwan stocks is 1 lot, which equals 1000 shares; whereas for US stocks, the trading unit is 1 share. This seemingly simple difference creates a huge gap in investors’ entry costs.

Taking TSMC as an example:

• Taiwan Stock (Code 2330): NT$561 per share, buying 1 lot requires NT$561×1000= NT$561,000 (about 560,000)
• US Stock (Code TSM): $95 per share, buying 1 share only costs $95 (about NT$3,000)

The same company, but the investment threshold differs by nearly 200 times. This is not because US stocks are “cheap,” but because Taiwan stocks require a minimum purchase of 1,000 shares at a time.

Understanding the Fundamental Difference Between Stock Price and Par Value

Before delving into the costs of one lot or one share, it is essential to understand two easily confused concepts.

Stock price is the real-time trading price determined by the market, reflecting investors’ expectations of the company’s future prospects. Stock prices fluctuate constantly based on supply and demand, company performance, macroeconomic factors, and more. For example, Tesla (TSLA) had a stock price of $101.81 on January 6, 2023, which rose to $254.11 by August 2, representing an increase of over 150% in less than seven months.

Unlike stock price, par value is the standard unit at the company’s initial issuance. Historically, Taiwan implemented a fixed par value system, with most Taiwanese companies having a par value of NT$10. Par value merely records the initial capital contribution of founding shareholders and has no direct relation to the current market price. For investors, to find out how much a stock costs, they should look at the current market price, not the par value.

Taiwan Stock Investors’ Choices: Whole Share Trading vs Fractional Share Trading

Because the high threshold of trading 1 lot (1,000 shares) of Taiwan stocks makes it difficult for many investors, the Taiwanese market has introduced a fractional share trading mechanism.

Whole share trading refers to purchasing 1 lot or multiples thereof. For example, at NT$561 per share for TSMC, buying one lot costs NT$561,000, which can be burdensome for most retail investors.

Fractional share trading allows investors to buy as few as 1 to 999 shares. This greatly lowers the entry barrier, enabling small and medium investors to participate. For example, you can buy only 100 shares of TSMC, which costs NT$56,100.

Both trading modes have their pros and cons:

Whole share trading benefits from high liquidity and quick execution but requires higher capital; fractional trading reduces the investment threshold but may face difficulties in execution or less favorable prices.

Comparing Market Rules of US Stock Market and Taiwan Stock Market

Besides the fundamental difference in trading units, the two major markets also differ significantly in fees, trading hours, and daily price limits:

US stocks generally have lower trading fees and more frequent trading, but Taiwan stocks offer more flexible fractional options to lower the entry barrier.

What Drives Stock Prices

Whether in the US or Taiwan, stock price fluctuations are influenced by multiple factors:

Fundamentals of the company are the most fundamental drivers. Companies with strong financial health and profitability attract continuous buying, pushing up their stock prices. Investors can evaluate the health of a company by reviewing quarterly and annual reports.

Macroeconomic environment also significantly impacts stock prices. Indicators such as GDP growth, interest rate policies, and exchange rate fluctuations influence the overall market trend. When the economy is doing well, the stock market tends to rise; conversely, it may decline during downturns.

Market sentiment and risk appetite are often underestimated. Optimistic investors actively buy, driving prices higher; pessimistic sentiments (such as geopolitical risks, industry adverse news, global economic shocks) can trigger sell-offs, leading to falling prices. Sometimes, market sentiment swings can even surpass fundamental influences.

Understanding how these factors operate can help investors make more rational decisions.

Summary: Choosing the Market and Strategy That Suit You

The question of “how much is one lot” in Taiwan stocks essentially reflects the different design philosophies of the two markets. Taiwan’s system of both whole and fractional shares aims to balance market liquidity and investor accessibility; while the US market’s flexible 1-share trading unit naturally lowers the entry cost for all investors.

Regardless of whether you choose US stocks or Taiwan stocks, understanding the trading mechanism, calculating the real costs, and evaluating fundamentals and macroeconomic conditions are key to becoming a smart investor.