Broker: OCBC Investment Research
Date of Report: 24 July 2025

Singapore Equities Set for Growth: Strategic Boost from EQDP and New Market Catalysts

Introduction: Singapore Equities Poised for a Revival

Singapore’s equity market is drawing increased attention as a resilient, high-quality investment destination. With its reputation for political stability, robust financial regulation, and strong governance, Singapore provides geographic diversification and attractive dividend yields. For investors seeking exposure to a stable currency, Singapore equities also offer a hedge against global currency volatility through the Singapore dollar (SGD).
A new chapter is unfolding following recent policy initiatives. The Monetary Authority of Singapore (MAS) has launched the SGD5 billion Equity Market Development Program (EQDP) and is rolling out an additional SGD50 million under the Grant for Equity Markets (GEMS) scheme to strengthen research and support listings. This move signals a strong commitment to invigorate the local market, focusing on improving liquidity and broadening participation, especially in small- and mid-cap stocks and S-REITs.

EQDP: A Transformative Liquidity Boost for Singapore Equities

The Equities Market Review Group announced a significant progress update, with an initial allocation of SGD1.1 billion to three asset managers under the EQDP. More appointments will follow in a second tranche by Q4 2025. The MAS is emphasizing:

• Alignment with EQDP objectives
• The ability to attract third-party capital
• Commitment to developing Singapore’s asset management and research infrastructure

Fund strategies are expected to target liquidity and participation in Singapore equities, with a major allocation to small- and mid-cap names. S-REITs are also positioned as likely beneficiaries.

Market Impact: Small- and Mid-Cap Stocks in the Spotlight

Recent months have seen rallies in select small- and mid-cap stocks, as investors position ahead of the anticipated EQDP implementation in the second half of 2025. Notably:

• Boustead Singapore: Share price up 62.1% YTD
• Centurion Corporation: Share price up 82.3% YTD

Both companies are exploring asset injections into REIT vehicles to unlock shareholder value. The FTSE ST Small Cap Index has outperformed the Straits Times Index (STI) and the MSCI Singapore Index year-to-date, reflecting increased investor interest in this segment.

Sector Rotation and Broader Market Diversification

The injection of liquidity is expected to create a virtuous cycle, expanding investor interest beyond the traditional large-cap names, particularly banks. In 2025, the Utilities and Communication Services sectors have outperformed within MSCI Singapore, while Consumer Staples and Consumer Discretionary sectors have lagged. This shift may continue, with lower SORA rates potentially driving a rotation from Banks into Real Estate and select Industrials.

S-REITs: Policy Changes and New Avenues for Growth

S-REITs stand to benefit from the EQDP, especially given recent changes under the Global Investor Program (GIP) for family offices. Now, Singapore Family Offices (SFOs) managing at least SGD200 million must deploy SGD50 million into equities listed on Singapore-approved exchanges, rather than REITs or business trusts. This policy shift could see fund managers tapping the EQDP to inject new liquidity into S-REITs, offsetting the exclusion from direct SFO inflows.

Performance Review: Index and Sector Breakdown

Key Singapore-Listed Companies Set to Benefit from EQDP

Below is a table of Singapore-listed companies under coverage, each with a market capitalization below SGD10 billion and considered potential beneficiaries of the EQDP. All companies are rated “Buy.”

Market Outlook: Overweight Rating Maintained for Singapore Equities

Singapore’s equity market has delivered strong results in 2025, with the Straits Times Index (STI) returning 11.7% YTD and reaching new highs. Despite the robust performance, the outlook remains positive, and an Overweight rating is maintained. The market is viewed as a relatively safe haven due to:

• Pro-business policies and political stability
• World-class infrastructure and smart nation initiatives
• Low inflation, high credit rating, and good governance

The STI’s forward dividend yield has compressed but remains attractive at 5.2%, close to one standard deviation above its 10-year historical average.

Valuations: Attractive Relative to Historical Levels

The STI is currently trading at a forward price-to-book (P/B) ratio of 1.4x — more than two standard deviations above the 10-year historical average. Its forward price-to-earnings (P/E) ratio stands at 13.1x, roughly 0.4 standard deviations above the 10-year average. While Singapore’s market fundamentals are solid, further escalation in global trade or geopolitical tensions could pose downside risks and result in earnings cuts.

STI Forward 12-Month Dividend Yield (%)

• Recent yield: 5.2%
• 10-year average: lower, but current yield is about one standard deviation above the mean

STI Forward 12-Month P/E and P/B Ratios

• Forward 12M P/E: 13.1x (about 0.4 s.d. above 10-year average)
• Forward 12M P/B: 1.4x (more than 2 s.d. above 10-year average)

Conclusion: Singapore Equities on a Firm Footing

The combination of policy-driven liquidity, renewed investor interest in small- and mid-cap stocks, and Singapore’s defensive market characteristics position the local equities market for continued outperformance. As initiatives like the EQDP and GEMS unfold, further re-rating catalysts could emerge, offering diverse opportunities for both income-focused and growth-oriented investors.
Investors are encouraged to monitor the evolving landscape, as the Singapore market continues to offer a blend of stability, yield, and growth potential — a compelling proposition in a volatile global environment.