The upcoming 3Q2025 reporting season, which will likely begin in October, will be a “key watchpoint”, say OCBC’s analysts.
Investors should assess if companies are able to deliver on earnings per share (EPS) growth that justifies an expansion of valuation multiples or any potential corporate actions taken to improve shareholder returns, they add.
SMIDs in Singapore have enjoyed strong share price momentum since the equities market review group announced in July the placement of $1.1 billion with three asset managers under the first tranche of the $5 billion Equity Market Development Program (EQDP).
On Sept 22, the Singapore Exchange (SGX Group) unveiled the iEdge Singapore Next 50 Indices, which aim to track the performance of the next 50 largest companies listed on the SGX Mainboard, excluding the 30 companies with the largest market capitalisations.
See also: SGX’s ‘Next 50’ indices to benchmark and help funnel potential components into STI
This includes the iEdge Singapore Next 50 Index, and the iEdge Singapore Next 50 Liquidity Weighted Index.
Cumulatively, the index covers a market capitalisation of $42.3 billion as at Aug 29, with the largest sectors being real estate, industrials, and financials.
See also: SGX’s ‘Next 50’ index stocks boast higher growth, dividend forecasts than STI names: JP Morgan
“We think that the new index serves to encourage ongoing broadening of participation in Singapore equities,” say Lee and Lim. “There is a possibility that some fund managers may adopt the index as a benchmark or launch cost-effective vehicles (such as ETFs) to track the index, which may spur a virtuous cycle of investor interest beyond STI/blue-chip names, further boosting liquidity and lifting valuations.”
The OCBC analysts acknowledge there has been some “preemptive positioning” ahead of the EQDP fund deployment. “While some may argue that the ongoing revitalisation of the Singapore equities market may support SMIDs to trade at valuations above historical averages, we would advocate for caution as it is still unclear to us if the ongoing rerating is sustainable.”
Lee and Lim add: “We would therefore recommend investors to stick to quality names with sound fundamentals, rather than to chase after market exuberance.”
OCBC’s preferred picks, or stocks that are under their coverage that have also been selected as constituents of the iEdge Singapore Next 50 Index are: Sheng Siong Group (with a fair value estimate of $2.37), Parkway Life REIT ($4.85), CapitaLand India Trust ($1.44), Hong Leong Asia ($3.10), Boustead Singapore ($2.00) and China Aviation Oil ($1.50).
Looking ahead, the Monetary Authority of Singapore (MAS) is set to appoint more asset managers under the second tranche of the EQDP by 4Q2025.
“The equities market review group continues to review other initiatives to enhance Singapore’s equities market, with more announcements expected heading into the end of 2025,” write Lee and Lim. “Ongoing market reforms, alongside Singapore’s defensive safe haven status, the strength of the Singapore dollar and attractive dividend yields are some reasons why we maintain an ‘overweight’ rating on Singapore equities.”
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Read more about the iEdge Singapore Next 50 Indices:
JP Morgan thinks STI could hit 6,000 points in 12-month ‘blue sky’ scenario (September)
Will the 'Next 50' draw allocation from the STI component stocks? (September)
SGX’s ‘Next 50’ indices to benchmark and help funnel potential components into STI (September)
SGX’s ‘Next 50’ index stocks boast higher growth, dividend forecasts than STI names: JP Morgan (September)
Read more about ongoing measures to enhance the Singapore equities market:
MAS picks Avanda, Fullerton, JP Morgan under $5 bil Equity Market Development Programme (July)
MAS to consult on ways to enhance investor recourse (July)
Equities market review group targeting ‘mid-sized but good-sized’ companies to list in Singapore (February)
Proposing equity market changes a ‘balancing act’ that comes with ‘trade-offs’: Chee Hong Tat (February)
