Many people who are just starting to learn about stocks often get stuck on the same question: Why are stock transactions in Taiwan so expensive, while in the US they are much cheaper? Actually, there is a very simple logic behind this — the difference in trading units.

Today, I will clarify these fundamental concepts for everyone, especially questions like how many shares make up one stock, and how much one share costs.

First, you need to understand what the stock price is. The stock price is the trading price of a stock in the market, representing how much money an investor needs to spend to buy or sell one share of stock. This price fluctuates in real-time based on bids and asks from both buyers and sellers; it is not fixed.

Stock prices are usually expressed as the price per share, meaning the buying or selling price of one share. Different countries use different currencies, for example, US stocks are in US dollars, and Taiwan stocks are in New Taiwan dollars. For example, in April 2024, the stock price of Taiwan Cement (Taiwan Cement Corporation) is 32.10 New Taiwan dollars, meaning one share costs 32.10 NTD.

So, how many shares are in one stock? One share is the basic unit of stock. Companies divide their shares into multiple units to raise capital, with each share representing a small ownership stake in the company. But here’s an important point — the face value of a stock and its market price are two different things. The face value only records the original capital contribution, while the stock price is determined by the company's profitability and investors’ expectations. As long as investors are optimistic about the company, the stock price will keep rising.

Therefore, for investors, to see how much a stock costs, you just look at the current market price. For example, at the beginning of 2023, Tesla’s stock price was $101.81 USD, and by August it had risen to $254.11 USD. In less than seven months, the stock appreciated more than double, demonstrating the power of market forces.

Now, let’s compare the differences between Taiwan stocks and US stocks. Taiwan stocks have a unique trading unit called “one lot,” which equals 1,000 shares. That is, buying one lot of Taiwan stock means buying 1,000 shares. US stocks do not have the concept of “one lot,” and are traded directly in units of shares.

What is the result of this? Take TSMC (Taiwan Semiconductor Manufacturing Company) as an example. Suppose its stock price is 561 NTD. One lot of TSMC would cost 561 multiplied by 1,000, which equals 561,000 NTD, roughly 560k TWD. Most retail investors cannot afford to buy that. That’s why Taiwan stocks introduced “odd-lot” trading, allowing investors to buy and sell less than one lot (from 1 to 999 shares).

In contrast, buying TSMC stock (ticker TSM) in the US only costs about $95 USD, roughly 3,000 NTD, to buy one share. This is why US stocks seem much cheaper — it’s not that the stocks themselves are cheaper, but because of the different trading units.

Taiwan’s full-lot trading has high liquidity but a high entry barrier, while odd-lot trading has a lower barrier but less liquidity. Full-lot trading occurs during market hours from 9:00 AM to 1:30 PM, while odd-lot trading happens after hours. US stocks are traded in units of 1 share, with generally lower transaction fees, most of which are zero-commission. The daily price limit is 10%, whereas Taiwan stocks have no daily limit.

The factors influencing a stock’s price mainly include three things. First is the company’s fundamentals, including financial health, profitability, and growth prospects, which can be seen through financial reports. Good performance naturally attracts investors. Second are macroeconomic factors, such as GDP, interest rates, and inflation, which affect the entire market. Third is market sentiment; investors’ optimism or pessimism can drive stock price fluctuations. Especially when bad news or global events occur, panic sentiment can lead to market declines.

Once you understand these basic concepts, you will be able to see more clearly how the stock market operates.