How to ride the iEdge Singapore Next 50 indices as momentum wanes

JUDGING from the headline performance of the iEdge Singapore Next 50 Index (N50), the middle segment of the local market seems to have lost some of its momentum.

The index delivered a total return of 3.6 per cent from Jan 1 to Jun 12, Bloomberg data shows. This is significantly weaker than the 10.5 per cent return chalked up by the Straits Times Index (STI).

Back in 2025, the N50 returned 26.7 per cent, which was not far behind the STI’s total return of 28.8 per cent.

The N50’s weakening absolute and relative performance overlooks the strong gains and expanding trading volumes of some of its smaller-cap constituents, though.

The strongest-performing constituent of the N50 this year has been UMS Integration , a manufacturer of components for semiconductor equipment makers such as Applied Materials. Its shares chalked a total return of 123.7 per from Jan 1 to Jun 12.

Another constituent of the N50 that has achieved a triple-digit percentage return this year is Frencken Group , which provides manufacturing services to multinationals in the automotive, healthcare, industrial, life sciences and semiconductor sectors. Its shares have returned 107.2 per cent so far this year.

The strong performance of these stocks is more evident in the iEdge Singapore Next 50 Liquidity Weighted Index (N50LW) than the standard free-float market cap version of the index.

In fact, UMS and Frencken were the largest weightings in the N50LW at the end of last month, at nearly 8 per cent and 5.9 per cent, respectively. Their weightings in the standard N50 at that point were 3.5 per cent and 2 per cent, respectively.

The N50LW has delivered a total return of 8.2 per cent so far this year – more than twice that of the N50. In 2025, the N50LW returned 27.2 per cent.

After a broad rerating of the Singapore market in 2025 in the wake of a slew of revitalisation initiatives, it seems that investors may now have to dig deep among the smaller-cap stocks to find strong returns.

New inclusions, exclusions

The N50 and N50LW were introduced by the Singapore Exchange (SGX) last year to track the performance of the 50 largest and most liquid mainboard-listed companies that are not part of the STI.

While constituents of the N50 are weighted by their free-float market capitalisation, the N50LW weights the same constituents by their six-month median daily traded value.

In both these indices, the weightings of the constituents are capped at 5 per cent.

If the weighting of a constituent exceeds the 5 per cent cap – which often happens because of market movements or corporate actions – the excess index weight is proportionally distributed to the remaining constituents of the indices at their quarterly reviews.

At the recent June review, for instance, the weightings of both UMS and Frencken in the N50LW were each rebalanced back down to 5 per cent.

Four constituents of the N50 and N50LW were also dropped: Singapore Post , Digital Core Reit , Wee Hur and China Sunsine Chemical . They were replaced by AEM , Top Glove , UI Boustead Reit and PC Partner Group .

These changes will take effect next week, on Jun 22.

S-Reits losing relevance?

When SGX announced the results of the quarterly review, it noted that five of the seven largest weights in the N50LW on May 29 were “technology” companies: AEM, iFast , UMS, Frencken and CSE Global .

These five companies, along with PC Partner, now account for 26.2 per cent of N50LW, even though their combined weighting in the N50 is only 15.8 per cent. This reflects the relatively strong trading intensity of their shares, SGX said.

On the other hand, Singapore-listed real estate investment trusts (S-Reits) now have a combined weighting of 35.9 per cent in the N50, versus only 29.7 per cent in the N50LW.

Are income-oriented counters losing their relevance in the Next 50 space?

Certainly, they seem to have less influence over the N50LW than the N50. Of the 16 S-Reit constituents of the indices, 11 of them have smaller weights in the N50LW than in the N50.

The N50LW weightings of NetLink NBN Trust and Keppel Infrastructure Trust (KIT) are also less than half their weightings in the N50.

“If the technology sector sustains its early year momentum, its influence within the index could surpass S-Reits, marking a shift from income‑led exposure toward more growth and global flow‑driven sectors,” SGX said.

Still, five of the seven largest weights in the N50 are income-oriented trusts: Keppel Reit , Suntec Reit , NetLink, KIT and CapitaLand Ascott Trust .

While the total returns generated by S-Reits tend to be relatively unexciting, new ones are constantly coming to market and finding their way into these indices.

This is evident from the inclusion of UI Boustead Reit at the recent review, even as Digital Core Reit was removed.

More to the point, S-Reits do not grow only by enhancing the revenues and capital values of their portfolio assets, but also by acquiring additional assets funded by the issue of new units.

Keppel Reit’s acquisition of a further one-third stake in MBFC Tower 3 announced last year expanded its property portfolio by more than 14 per cent, though the transaction was expected to be dilutive to its distributions per unit.

This suggests that the composition of counters in the Next 50 space may not change all that quickly, and that the recent outperformance of the N50LW versus the N50 may well persist for some time.

Instead of trying to gain broad exposure to this smaller-cap segment of the market, investors might be better off focusing narrowly on companies with businesses that are robust and riding big global trends.