Singapore’s stock market is in an unusual position.
The Straits Times Index (STI) is hovering close to record highs. Yet the Monetary Authority of Singapore (MAS) is continuing to pour billions of dollars into a programme designed to strengthen and rejuvenate the country’s equity market.
On Sept 29, MAS announced that it will allocate another S$1.45 billion to five global asset managers under its Equity Market Development Programme (EQDP). The latest commitments bring total allocations under the S$6.5 billion programme to S$5.4 billion across 14 asset managers.
The five new managers are Amundi, Franklin Templeton, HSBC Asset Management, M&G Investments and Natixis Investment Managers.
At first glance, the timing may seem strange.
If Singapore stocks are already performing so well, why does the market need to be “revived”?
The answer may lie in looking beyond the STI.
The STI is strong. But how broad is the strength?
The STI’s performance has been impressive. But investors should be careful about assuming that a record index automatically means the entire Singapore stock market is enjoying equally strong demand.
One obvious explanation for the STI’s strength is the performance of Singapore’s three major banks: DBS, OCBC and UOB.
That is not merely an observation from market commentators. Recent market data has repeatedly highlighted the banks’ influence on the index.
On Sept 28, the Securities Investors Association Singapore noted that the STI’s gain over the preceding week was driven almost entirely by the three banks. DBS, OCBC and UOB all rose during the week, helping push the STI above 5,700.
Earlier in September, SIAS similarly described the three banks as driving the STI to a new all-time high above 5,800, with DBS, OCBC and UOB gaining between roughly 3% and 4% that week.
This creates an important distinction for investors:
A strong STI does not necessarily mean that the entire Singapore equity market is broad-based and deep.
That distinction is precisely where MAS’s latest initiative becomes interesting.
Look beyond the headline index
The STI is a blue-chip benchmark. It is not designed to represent every listed company on the SGX.
That means investors can see an apparently spectacular headline market performance while smaller and less liquid companies experience a very different environment.
There was a telling example on Sept 28.
The STI gained 0.3%, but the broader market recorded 224 advancing securities against 305 decliners. The iEdge Singapore Next 50 Index also fell 0.2%.
One day’s trading data should not be treated as proof that Singapore’s market rally is narrow. But it illustrates why looking only at the STI can give investors an incomplete picture.
And that is arguably the problem MAS is trying to address.
MAS is not simply trying to push the STI higher
The latest S$1.45 billion allocation is part of a much larger effort to attract institutional capital into Singapore equities.
MAS said the five new managers will draw on their global distribution networks to bring new sources of international capital into Singapore and the region, broadening investor participation in Singapore equities.
That is a very different objective from simply trying to lift the STI.
The bigger ambition is to create an equity market with greater institutional participation, deeper liquidity and a wider range of companies capable of attracting serious investor attention.
And there is an important clue in what MAS announced alongside the S$1.45 billion.
The S$20 million announcement may be more revealing
MAS is also committing S$20 million to a new market-making grant under the Grant for Equity Market Singapore scheme.
The initial programme will cover around 80 small- and mid-cap stocks and newly listed companies, particularly those outside the STI.
The objective is to improve liquidity, narrow bid-ask spreads, reduce execution costs and strengthen price discovery.
This is significant.
Institutional investors do not simply ask whether a company is cheap or expensive.
They also need to know whether they can buy or sell a meaningful position without moving the market too much.
A small company with weak liquidity can therefore become a difficult investment proposition even if its underlying business is attractive.
That creates a vicious circle.
Low liquidity → fewer institutional investors → less research and attention → weaker price discovery → potentially lower investor interest → continued low liquidity.
MAS is effectively trying to break that cycle.
The real test is whether the rally can broaden
This is why the latest MAS announcement should not necessarily be interpreted as a statement that Singapore’s stock market is performing badly.
In fact, the opposite may be true.
The STI’s strength gives MAS an opportunity to build on increased investor interest and attempt to spread that interest more broadly across the equity market.
The question is whether that can happen.
Can international asset managers bring fresh capital beyond the biggest Singapore blue chips?
Can improved market-making make smaller companies more investable?
Can greater liquidity attract more institutional research and participation?
And ultimately, can Singapore create a market where investors look beyond the same handful of large companies?
Those questions matter because a healthy equity market is about more than the level of its benchmark index.
There is another important distinction: price performance versus market quality
For investors, it is tempting to measure the health of the Singapore market simply by looking at the STI.
But MAS’s programme suggests that policymakers are thinking about a broader set of metrics.
Liquidity.
Institutional participation.
Price discovery.
New listings.
Access to capital.
Exit opportunities for investors.
These are structural characteristics of an equity market.
MAS said the combined measures are intended to deepen institutional and retail participation and make Singapore’s public markets a more effective destination for listings, financing and exits.
That is a much bigger objective than simply achieving another STI record.
What should investors watch now?
The most interesting question is not whether the S$1.45 billion will cause Singapore stocks to rise.
There is no guarantee that it will.
Instead, investors should watch for evidence that the programme is changing the breadth and quality of the market.
Three indicators will be particularly useful.
1. Do smaller companies start attracting more institutional money?
If capital remains concentrated overwhelmingly in the largest banks and blue chips, the impact of the programme may be less transformational than MAS hopes.
2. Does liquidity improve?
The market-making programme provides a relatively direct test. Narrower bid-ask spreads and higher trading activity in the targeted stocks would indicate that the initiative is having a measurable effect.
3. Does the pipeline of attractive new listings improve?
Ultimately, Singapore needs more than money flowing into existing companies.
A deeper equity market should also provide companies with a compelling reason to list, raise capital and remain listed in Singapore.
That is why the long-term success of the programme should probably not be judged by whether the STI reaches 6,000.
It should be judged by whether more companies become genuinely investable.
The irony of Singapore’s record-high STI
There is an irony in MAS trying to rejuvenate the Singapore equity market when its flagship index is already performing strongly.
But perhaps that is exactly the point.
The current rally demonstrates that international and institutional investors are willing to put substantial capital into Singapore when the opportunity is compelling.
The challenge is whether Singapore can turn that interest into something broader and more durable.
The three banks may have helped propel the STI to record territory. But a truly revitalised Singapore equity market would ideally offer investors a much wider opportunity set.
So the most important number from today’s announcement may not be S$1.45 billion.
It may be the number of companies that eventually benefit from the capital, liquidity and institutional attention that MAS is trying to bring into Singapore.
The STI may already be telling us that investors like Singapore. MAS is now trying to make sure they have more reasons to invest beyond the banks.