Background
The Monetary Authority of Singapore (MAS) announced a S$5 billion Equity Market Development Programme (EQDP) in February 2025. The EQDP aims to strengthen the local asset management and research ecosystem and increase investor interest in Singapore’s equities market.
Under the EQDP, MAS will invest in strategies managed by Singapore-based asset managers that have a strong focus on Singapore listed equities and broaden investor participation beyond large-cap stocks.
MAS seeks to partner asset managers that demonstrate a strong track record and proven investment capabilities, and are committed to meeting developmental outcomes to grow investment and research capabilities in Singapore.
Eligible fund strategies include those that invest fully or substantially in Singapore public equities. Strategies with a higher allocation or tilt towards small and mid-caps are preferred.
In Singapore, referring to the definition commonly used by the Singapore Exchange (SGX), small-cap stocks are typically defined as companies with a market capitalization between S$100 million and S$1 billion. Mid-cap stocks are defined as those with a market capitalisation between S$1b and S$3b.
Fund strategies should be actively managed, and be able to draw in interest and capital from other commercial investors, in addition to seeding from the EQDP.
MAS said that they are prepared to consider both existing strategies that meet the requirements, and new fund strategies that will be launched.
Our Interpretation and assessment of impact
This is part of the first set of measures to strengthen the competitiveness of the Singapore’s stock markets. There were other measures announced together including tax incentives. This was off the back of Singapore setting up a task force in 2024 to revive the stock market amidst poor liquidity, lack of new listings and a slew of delistings.
We are not overly hyped on this news for various reasons.
1) Pace of Fund Deployment
We think the intent is to stimulate interest in the mid to long term rather than a short term boost to the index, the deployment of the funds may be over a period of time and slower than hoped by most investors.
Nevertheless, this may lead to a snowball effect where other investors, institutional and retail are attracted and enter the fray. The total market capitalisation for the Singapore stock market is about S$900 billion but the 30 stocks in the Straits Times Index accounts for nearly S$600 billion of this. Therefore, the S$5 billion fund may be a substantial amount as it would be targeted at the small and mid cap space.
2) Structural issues
The fund has also been described by media and analysts as overhyped due to concerns about the lack of a long-term impact and the potential for it to be a mere short term band-aid solution for structural issues in the Singapore stock market.
The EQDP’s measures may not go far enough in addressing the systemic issues facing the Singapore stock market, such as the ability to attract quality listings, stem delistings, the need for more robust regulations, a more diverse and competitive asset management ecosystem, and improved investor confidence.
Research house views
As rumours suggests MAS is close to shortlisting strategies, there has been several research houses who has started picking potential plays.
One research house came up with a 5 factor screen for small to mid cap stocks with a market cap that is larger than SGD 300million:
-A net cash position of at least 15%
-At least 4% dividend yield
-At least 10% FY25 EPS growth
-At least 50% of FY24 revenues from Singapore
-Forward PE below the 4 year average
Stocks mentioned which stocks check at least 3 or 4 of the 5 factors include ComfortDelGro, Hong Leong Asia, SIA Engineering, IFAST, UMS Integration, Frencken and Raffles Medical.
Another research house looked through their research coverage database, picking up stocks that had a minimum daily traded value. The stocks picked included 5 large caps and 8 small caps. The 5 large caps include Keppel, Sats, Sembcorp Industries, SIA Engineering and UOL Group. These large caps mainly exhibit either sustainable growth or had potential value unlocking.
The 8 small caps which include BRC Asia, CSE Global, Food Empire, Frencken, Marco Polo Marine, Pan-United Corp, Propnex and Q&M Dental.
Our Guesses
Before specifics are out, everyone now has an opinion as to which stocks would be invested in. Fundamentally, we would still focus on the basics. Given there are few hypergrowth stocks in Singapore, we look towards stocks that have growth at a reasonable pace, local revenue exposure, adequate liquidity and a large enough market cap that would allow fund managers to add a sizeable amount. We would also avoid stocks that have a chance of delisting as while they may be a trade idea from a delisting play perspective, they may not be suitable for the funds.
In the small cap space, We are inclined towards manufacturing plays such as Frencken, AEM, Nanofilm. We also like stocks such as CSE Global.
Manufacturing plays such as Frencken, AEM and Nanofilm are looked at by many investors due to the longer term tailwinds and positive sentinment for such plays. Although they do not have significant local revenue exposure, they sell to many of the MAG 7 stocks, which is another reason for their interest.
In the mid cap space, we like Raffles Medical, Sheng Siong and Starhub. All 3 stocks have substantial local revenue exposure and are in industries that would grow at a reasonable pace, being healthcare, consumer staples and telecommunications. While actual growth has been lumpy for Raffles Medical and Starhub, both stocks exhibit signs that the worst is over for them, have a growth story and would be interesting to fund managers.
Closing Statements
The MAS fund trade angle is a little too complicated in that while everyone understands the intent, no one really knows how, when and at what pace would the funds be deployed.
It also begs the question as to whether high quality funds who are capable of raising funds on their own would want to partner the MAS as any added compliance or oversight could be cumbersome for funds who look to speed in their execution. Of course, there will likely be some new funds or government linked funds which would partner the MAS.
At the end of the day, a rising tide lifts all boats, so for investors who do not want to guess, perhaps one approach would be to invest in broad base indices such as the Straits Times Index or REIT ETFs.
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