The Singapore Exchange, known as SGX, recently launched two new indices: the iEdge Singapore Next 50 Index and its version weighted by liquidity. This move marks a key step in how Singapore’s capital markets grow and change.
The iEdge Singapore Next 50 Index tracks the 50 companies just below those in the main Straits Times Index, or STI. The STI itself includes the top 30 firms on SGX by market value and trading volume. These new indices fill a gap. They spotlight mid-sized companies that play a big role in the economy but often stay out of the spotlight.
Why does this matter? Singapore aims to build a stronger market that welcomes all kinds of investors. The next 50 companies come from sectors like tech, health care, and finance. For example, firms in green energy or e-commerce now get a clear spot in these indices.
This helps small investors see options beyond big names like DBS Bank or Singapore Airlines. Before this, many investors focused only on STI stocks. Now, they can explore more choices that match their risk level and goals.
The liquidity-weighted version adds another layer. It gives more weight to companies with high trading volume. This makes the index easier to use for funds and traders who need quick buys and sells. In simple terms, liquidity means how fast you can trade shares without big price swings. High liquidity reduces costs and risks.
SGX data shows that these next-tier stocks already draw steady interest. In 2024, their average daily trading hit over S$100 million, up 15% from the year before.
This launch pushes SGX to make markets fairer for everyone. It draws in local startups and family businesses ready to list. Experts say it boosts Singapore’s spot as a top hub in Asia. One market analyst noted, “These indices open doors for overlooked gems, helping the whole economy thrive.
” Investors might wonder: how do these fit into portfolios? They offer balance—less volatile than small caps but with growth potential beyond the STI. Overall, SGX builds a fuller picture of Singapore’s business world, one that captures real chances for all.
Strategic Context and Market Positioning
The Gap in Singapore’s Index Architecture
Singapore’s equity market has long been dominated by the STI, which tracks the 30 largest companies by market capitalization. While this blue-chip focus has provided stability and international recognition, it has also created a significant representation gap. The new indices address this by capturing companies ranked 31st to 80th by market capitalization, representing a substantial portion of Singapore’s corporate landscape that has been underrepresented in benchmark indices.
This strategic positioning fills a critical void in Singapore’s index architecture. Unlike mature markets such as the United States with its Russell 2000 or the United Kingdom with its FTSE 250, Singapore has lacked a comprehensive mid-cap benchmark. The iEdge Singapore Next 50 indices now provide this missing link, creating a more complete picture of Singapore’s equity market performance.
Alignment with National Economic Objectives
The launch aligns closely with the Monetary Authority of Singapore’s (MAS) Equity Market Development Programme, which aims to enhance market vibrancy and attract greater investment flows. Deputy Chairman Chee Hong Tat’s announcement of these indices on September 12, 2024, underscored their role in creating “a virtuous circle and generating positive momentum for the entire market.”
This initiative reflects Singapore’s broader economic strategy of positioning itself as a regional financial hub while supporting domestic companies’ access to capital markets. By providing greater visibility to mid-tier companies, the indices support the government’s efforts to foster entrepreneurship and business growth across various sectors.
Technical Architecture and Methodology
Index Construction and Eligibility Criteria
The iEdge Singapore Next 50 indices employ rigorous, transparent, rules-based methodology incorporating multiple screening criteria:
Market Capitalization Requirements: Companies must maintain a minimum market capitalization of $100 million, ensuring sufficient scale and institutional viability while excluding micro-cap stocks that might exhibit excessive volatility.
Liquidity Thresholds: The $100,000 minimum median daily traded value requirement ensures that included companies maintain adequate trading activity, addressing one of the primary concerns of institutional investors regarding Singapore’s mid-cap segment.
Free Float Considerations: The incorporation of free float adjustments ensures that index weights reflect shares actually available for trading, providing more accurate representation of investable opportunities.
Dual Index Approach: A Sophisticated Framework
The launch of two complementary indices represents a sophisticated approach to market representation:
iEdge Singapore Next 50 Index (Market Cap Weighted): This headline index uses traditional free float market capitalization weighting, providing a broad representation of company size and market value within the segment.
iEdge Singapore Next 50 Liquidity Weighted Index: This innovative approach allocates weights based on six-month median daily traded value, offering investors exposure tilted toward more actively traded stocks. This methodology addresses the liquidity premium that institutional investors typically demand.
The dual approach recognizes that different investor segments have varying priorities. Traditional institutional investors may prefer market cap weighting for its simplicity and broad representation, while active managers might favor the liquidity-weighted approach for its emphasis on tradeable opportunities.
Rebalancing and Maintenance Framework
The quarterly rebalancing schedule (March, June, September, and December) using data from the preceding months ensures that the indices remain current and representative. This frequency strikes an optimal balance between maintaining index integrity and minimizing turnover costs for tracking funds.
The monthly publication of constituent lists provides transparency and allows market participants to anticipate changes, reducing tracking errors and implementation costs for potential index-tracking products.
Sector Composition and Market Representation
Diversified Sector Exposure
The indices’ sector composition reflects Singapore’s economic diversity:
Real Estate Investment Trusts (REITs): With 17 constituents, REITs represent the largest sector, highlighting Singapore’s position as a regional REIT hub and the importance of real estate in the domestic economy.
Industrial and Financial Services: These sectors provide exposure to Singapore’s manufacturing base and its role as a financial center, respectively.
Energy and Materials: These sectors offer investors exposure to Singapore’s strategic position in global commodity flows and energy trading.
Top Holdings Analysis
The largest weightings in both indices—ComfortDelGro, Yangzijiang Financial Holding, and Keppel Reit at 5% each—demonstrate the indices’ focus on established, liquid mid-cap names. The liquidity-weighted index’s additional emphasis on companies like iFast Corporation, Singapore Post, and Sheng Siong Group (4-5% weightings) reflects these companies’ active trading profiles.
This composition suggests that the indices successfully capture companies that have achieved significant scale and market presence while maintaining the growth characteristics that distinguish them from mature blue-chip stocks.
Market Impact and Liquidity Dynamics
Addressing Singapore’s Liquidity Challenge
Singapore’s equity market has long struggled with liquidity concerns, particularly in the mid-cap segment. The new indices directly address this challenge by establishing minimum liquidity thresholds and providing a framework for increased institutional participation.
The liquidity-weighted index is particularly innovative, as it creates incentives for companies to maintain active trading by rewarding higher turnover with greater index representation. This mechanism could create a positive feedback loop where companies actively work to improve their trading profiles.
Potential for Increased Capital Flows
By creating benchmarks for the mid-cap segment, the indices establish a foundation for passive investment flows. International institutional investors often rely on recognized benchmarks for allocation decisions, and the absence of a credible mid-cap index has likely limited foreign investment in this segment.
The indices also provide domestic fund managers with tools for more granular market exposure, potentially leading to the development of specialized investment strategies focused on Singapore’s mid-cap opportunities.
Product Development Opportunities and Market Infrastructure
Exchange-Traded Funds (ETFs) Potential
The most immediate opportunity lies in ETF development. Singapore currently has limited ETF offerings focused on domestic equities, and the new indices provide natural benchmarks for such products. ETFs tracking these indices would offer retail investors cost-effective exposure to Singapore’s mid-cap segment, potentially democratizing access to this market tier.
The success of REIT-focused ETFs in Singapore suggests strong investor appetite for thematically focused products, and mid-cap ETFs could attract similar interest from both retail and institutional investors.
Derivatives and Structured Products
The establishment of recognized benchmarks creates opportunities for derivatives development, including index futures and options. These instruments would provide additional tools for portfolio management, hedging, and tactical allocation strategies.
Structured product issuers could also utilize these indices as underlying benchmarks, creating additional distribution channels and investment opportunities tailored to specific risk-return profiles.
Active Management Applications
Fund managers focusing on Singapore equities now have more sophisticated benchmarking tools, enabling more precise performance attribution and risk management. This could lead to the development of specialized mid-cap strategies and improved overall market efficiency through enhanced analyst coverage and price discovery.
Challenges and Implementation Considerations
The Accessibility Gap
The current inability to directly trade these indices represents a significant limitation. Until product issuers launch tracking funds or ETFs, the indices remain primarily theoretical constructs rather than investable opportunities. This gap between benchmark creation and product availability could limit near-term impact.
Institutional Investment Barriers
As noted by Maybank’s Thilan Wickramasinghe, deeper structural reforms may be necessary for meaningful institutional adoption. Many mid-cap companies in Singapore face challenges including:
Limited Free Float: Many companies remain closely held by founding families or strategic investors, limiting shares available for institutional investment.
Valuation Multiples: Some companies trade at multiples that may not align with institutional return requirements or risk parameters.
Corporate Communication: Inconsistent investor relations practices may limit institutional engagement and analyst coverage.
Market Education Requirements
The complexity of having two related but distinct indices requires substantial market education. Investors need to understand the differences between market cap and liquidity weighting methodologies and their implications for portfolio construction and performance characteristics.
Comparative Analysis: Learning from Global Best Practices
The FTSE 250 Model
The London Stock Exchange’s FTSE 250, covering companies ranked 101-350 by market cap, provides a useful benchmark. Since its inception, the FTSE 250 has successfully attracted dedicated investment products and has become a recognized gauge of UK mid-cap performance.
Key success factors from the FTSE 250 experience include:
- Consistent methodology and transparent governance
- Strong product ecosystem development
- Regular review and adaptation to market conditions
- Integration with broader index family
The Russell 2000 Experience
The Russell 2000’s success in the US market demonstrates the potential for mid and small-cap indices to become major investment categories. The index supports hundreds of billions in assets across numerous ETFs, mutual funds, and institutional mandates.
Critical lessons include:
- The importance of liquidity screening in index construction
- The value of family relationships between indices (large, mid, small cap)
- The role of derivatives markets in enhancing index utility
Future Implications and Strategic Outlook
Pathway to STI Inclusion
The new indices create a formal pathway for companies to demonstrate readiness for STI inclusion. Companies that achieve consistent performance and liquidity metrics within the Next 50 indices may become natural candidates for STI expansion or replacement of underperforming components.
This graduated approach to index inclusion could incentivize corporate governance improvements and strategic initiatives aimed at enhancing market visibility and trading activity.
Catalyst for Market Development
Beyond immediate benchmarking applications, these indices could catalyze broader market development initiatives:
Enhanced Analyst Coverage: Index inclusion often drives research coverage, potentially improving information availability and price discovery for constituent companies.
Corporate Governance Evolution: The transparency and liquidity requirements may encourage companies to adopt best practices in governance and investor communication.
IPO Pipeline Development: The existence of mid-cap benchmarks could make Singapore’s market more attractive for companies considering public listings, as it provides a clear framework for post-IPO index inclusion and institutional recognition.
Integration with ESG and Thematic Investing
Future developments may include ESG-screened versions of these indices or thematic variations focusing on specific sectors or investment themes. Singapore’s position as a sustainable finance hub makes ESG integration particularly relevant for long-term index evolution.
Risk Assessment and Mitigation Strategies
Concentration Risk
While the indices aim for diversification, the significant REIT weighting (34% of constituents) creates sector concentration risk. Market participants should monitor this concentration and consider its implications for portfolio construction.
Liquidity Risk Management
The liquidity-weighting mechanism, while innovative, requires careful monitoring during market stress periods. The quarterly review process should include stress-testing scenarios to ensure index integrity during volatile conditions.
Implementation Risk
The success of these indices depends heavily on product development and market adoption. SGX should consider actively engaging with asset managers and ETF providers to encourage product development around these benchmarks.
Recommendations for Market Participants
For Asset Managers
- Product Development: Consider developing ETF or mutual fund products tracking these indices to capture first-mover advantages in Singapore’s mid-cap space.
- Benchmark Adoption: Evaluate these indices as performance benchmarks for existing Singapore equity strategies.
- Research Investment: Increase research coverage of Next 50 constituents to capitalize on potential information advantages.
For Institutional Investors
- Strategic Allocation: Consider dedicated allocations to Singapore mid-cap strategies once suitable investment vehicles become available.
- Due Diligence: Develop expertise in evaluating Singapore mid-cap opportunities, particularly in sectors with high index representation.
For Listed Companies
- Liquidity Enhancement: Implement strategies to improve trading activity and free float to enhance index weighting potential.
- Investor Relations: Strengthen communication with institutional investors and research analysts.
- Corporate Governance: Adopt best practices that align with institutional investor expectations.
Conclusion: A Foundation for Market Evolution
The launch of the iEdge Singapore Next 50 indices represents more than a technical enhancement to Singapore’s market infrastructure—it signals a strategic evolution toward a more comprehensive and inclusive capital market ecosystem. By providing benchmarks for the historically underrepresented mid-cap segment, SGX has created tools that could fundamentally reshape how investors access and evaluate Singapore equity opportunities.
The success of these indices will ultimately depend on their adoption by the investment community through product development and institutional utilization. However, the solid technical foundation, transparent methodology, and strategic alignment with national economic objectives position these indices well for long-term success.
As Singapore continues its evolution as a regional financial hub, the iEdge Singapore Next 50 indices provide essential infrastructure for capturing the full spectrum of the city-state’s economic dynamism. They represent a critical step toward creating a more vibrant, liquid, and accessible equity market that serves both domestic companies seeking capital and international investors seeking exposure to Singapore’s growth story.
The true measure of these indices’ success will be their ability to attract investment flows, improve market liquidity, and provide companies with enhanced access to capital. Early indicators suggest strong potential, but sustained success will require continued collaboration between SGX, asset managers, institutional investors, and the companies themselves to realize the full potential of this market development initiative.
Maxthon
In an age where the digital world is in constant flux, and our interactions online are ever-evolving, the importance of prioritizing individuals as they navigate the expansive internet cannot be overstated. The myriad of elements that shape our online experiences calls for a thoughtful approach to selecting web browsers—one that places a premium on security and user privacy. Amidst the multitude of browsers vying for users’ loyalty, Maxthon emerges as a standout choice, providing a trustworthy solution to these pressing concerns, all without any cost to the user.
Maxthon, with its advanced features, boasts a comprehensive suite of built-in tools designed to enhance your online privacy. Among these tools are a highly effective ad blocker and a range of anti-tracking mechanisms, each meticulously crafted to fortify your digital sanctuary. This browser has carved out a niche for itself, particularly with its seamless compatibility with Windows 11, further solidifying its reputation in an increasingly competitive market.
In a crowded landscape of web browsers, Maxthon has forged a distinct identity through its unwavering dedication to offering a secure and private browsing experience. Fully aware of the myriad threats lurking in the vast expanse of cyberspace, Maxthon works tirelessly to safeguard your personal information. Utilizing state-of-the-art encryption technology, it ensures that your sensitive data remains protected and confidential throughout your online adventures.
What truly sets Maxthon apart is its commitment to enhancing user privacy during every moment spent online. Each feature of this browser has been meticulously designed with the user’s privacy in mind. Its powerful ad-blocking capabilities work diligently to eliminate unwanted advertisements, while its comprehensive anti-tracking measures effectively reduce the presence of invasive scripts that could disrupt your browsing enjoyment. As a result, users can traverse the web with newfound confidence and safety.
Moreover, Maxthon’s incognito mode provides an extra layer of security, granting users enhanced anonymity while engaging in their online pursuits. This specialized mode not only conceals your browsing habits but also ensures that your digital footprint remains minimal, allowing for an unobtrusive and liberating internet experience. With Maxthon as your ally in the digital realm, you can explore the vastness of the internet with peace of mind, knowing that your privacy is being prioritized every step of the way.