Making SGX small and mid-caps great again: MAS-appointed fund managers could lead charge

[SINGAPORE] Singapore’s 240 small and mid-cap companies, each worth between S$100 million and S$10 billion, may draw a fresh wave of capital and investor interest as fund managers under the Monetary Authority of Singapore’s (MAS) S$5 billion Equity Market Development Programme (EQDP) turn their focus to the segment.

Fund managers noted that the segment has historically suffered from thin liquidity, limited analyst coverage and muted investor interest, leaving valuations depressed.

“Low valuations and thin liquidity, especially beyond large-cap names, discouraged quality listings and shareholder-friendly moves,” said Eleanor Seet, president and head of Asia ex-Japan at Amova Asset Management, referring to the low interest as a “negative loop”.

She added that the new equity market programme is beginning to break that cycle. “As liquidity improves, we expect a positive loop where stronger valuations drive better listings and proactive corporate strategies,” she told The Business Times.

“Valuations have been depressed due to low investor interest despite some companies having attractive fundamentals,” Kenneth Ong, portfolio manager for Asian equities at Lion Global Investors (LGI).

Small and mid-cap (SMID) stocks make up 30 per cent of the market’s total capitalisation, and roughly a third of this year’s trading activity.

With S$5 billion set aside for the EQDP, last Wednesday (Nov 19), MAS announced that it would allocate S$2.85 billion to a second batch of six asset managers. The appointed managers are Amova Asset Management, AR Capital, BlackRock, Eastspring Investments (Singapore), Lion Global Investors and Manulife Investment Management (Singapore).

The first batch announced in July saw S$1.1 billion placed with JP Morgan Asset Management, Fullerton Fund Management and Avanda Investment Management.

The next phase of EQDP appointments, involving the remaining amount of S$1.05 billion, is expected in the second quarter of 2026.

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Focus on the small and mid-cap segment

The EQDP builds on these factors by guiding investment towards SMID companies. When selecting asset managers under the programme, MAS said that it considered their proposed fund strategies, with a preference for higher allocation to SMID stocks. This includes companies listed on Catalist, where it is commercially determined by the appointed asset managers as investment opportunities.

The EQDP is funded from MAS’ investment portfolio and the Financial Sector Development Fund. Eligible strategies include those focused on Singapore equities or with a substantial Singapore component within a regional or thematic approach, MAS said.

Strategies are expected to be actively managed, commercially viable and capable of attracting capital from institutional investors, family offices and other private entities.

Fund managers are also required to deliver developmental outcomes, such as expanding their operations and employment in Singapore, contributing to talent development, and strengthening fund management capabilities across Singapore, Asean, and the wider Asia-Pacific region.

LionGlobal, which is one of the selected fund managers, runs the LionGlobal Singapore Trust Fund.

Jacqueline Yeh, LionGlobal’s head of international and institutional business, noted that about 60 per cent of its outperformance comes from the SMID segment. Its current exposure to such stocks (excluding real estate investment trusts) is around 40 per cent, up from about 20 per cent historically.

Yeh attributed the results to “actively researching and investing in Singapore’s SMID segment” and “cultivating strong relationships with the management and board of directors of these companies”.

Overlooked high-quality stocks

Koh Huijian, chief executive officer at Manulife Investments Singapore, pointed to the SMID segment offering many high-quality companies that have been overlooked.

Manulife Investments’ Singapore All-Cap Equity strategy, for instance, will target a considerable allocation to the SMID segment.

Manulife Investments will also maintain significant exposure to large caps to “ensure a balanced portfolio and broaden alpha opportunities, and also consider liquidity and higher potential to scale AUM with an all-cap fund”, said Koh.

“Our Singapore equity strategies focus on high-quality companies with strong fundamentals, sustainable growth prospects and attractive valuations – from financials and technology to consumer and industrial leaders, as well as emerging champions poised for long-term growth,” she added.

Meanwhile, Amova is set to debut two new Singapore Equity funds in Q1 2026. This comes as the existing Amova Singapore Equity Fund has outperformed the Straits Times Index by 4.9 per cent and 2.1 per cent per annum over one and three years, noted Seet.

“We expect MAS’ EQDP will make the market even stronger and more vibrant by attracting quality IPOs and broader investor participation, which will further expand the investable universe,” she said, adding that the programme positions Amova well to deploy capital effectively and create value for investors.

Other EQDP managers are meanwhile targeting niche growth areas. AR Capital, for example, has been investing in the global generative artificial ecosystem for several years.

This spans semiconductors to data enablers and AI applications said Merrill Tan, director of equity research and global technology, media, telecommunications equity analyst at investment manager AR Capital, speaking at a panel discussion last month.

Tan added that the firm’s Singapore equity coverage is led by global sector specialists.

Another newly appointed EQDP manager, BlackRock – the world’s largest asset manager with US$11.6 trillion in assets under management – launched an Asia-Pacific-focused absolute return fund for retail investors in Singapore and Hong Kong in June.

Dennis Quah, head of Singapore wealth at BlackRock, previously told BT that the firm takes a long position on stocks expected to perform well and a short position on those expected to underperform, using a systematic investing approach.