Investors are typically drawn to the Singapore stock market for its safe harbour qualities, and it is not surprising that their portfolios would primarily, if not only, focus on large caps. Today, out of more than 600 companies on the Singapore Exchange (SGX), the 30 largest companies — as represented by the Straits Times Index (STI) — command an overwhelming 85% share of the market’s capitalisation.
That said, the large-cap phenomenon is not confined to Singapore. For the past 12 years, large caps have been consistently outperforming small caps in the US and the rest of the world. This large-cap supercycle is fuelled by prolonged low interest rates, allowing large companies to quickly acquire smaller ones, and by the surge in investor demand for tech mega caps.
