To this end, the Singapore Exchange has on Sept 22 launched the iEdge Singapore Next 50 indices, which comes in two variants, both of which track the next 50 largest stocks outside the 30 component stocks of the Straits Times Index (STI). The launch of the Next 50 is part of the broader government initiative that includes the allocation of $5 billion to fund managers to invest in smaller stocks under the Equity Market Development Programme, or EQDP.
Due to especially pronounced industry cycles, the small- and mid-cap stocks listed in Singapore had to go through the ups and downs that did not sit well with investors caught on the wrong foot. Depending on the sector and at varying points in time, offshore and marine counters, tech stocks, and even healthcare names took turns to have their days in the sun or fall drastically out of favour. “They tend to go up and down, up and down. And that sort of dissuades people from the small- and mid-caps because of the volatility,” observes Kenneth Ong, portfolio manager with the Asian equities team at Lion Global Investors.
Today, with the overall improvement in market sentiment, thanks to a concerted effort to improve the market, Ong sees changes happening — and not merely due to industry sector-specific reasons. “I think what is shifting now is that there’s a potential for the entire small- and mid-cap space to develop as a sub asset class on its own. Right now, because of the combination of this equity programme and also because of the combination of the quality of companies that are now in the market, we have the potential to build up this asset class now,” says Ong, speaking at a panel discussion on Sept 23, organised by corporate finance firm SAC Capital.
