Analysts at Macquarie Equity Research (Macquarie) see an approaching resurgence for small-to mid-cap stocks in Singapore with the arrival of the Monetary Authority of Singapore’s (MAS) $5 billion equity market development programme (EQDP), which they believe will be implemented in the third quarter.

Beyond the capital inflow, analysts Jayden Vantarakis, Zhiwei Foo, Kelly Kwok and Rachel Tan note that the MAS expects other private capital to be crowded into appointed mandates.

Their methodology in identifying potential beneficiaries takes into account an average daily value traded (ADV) of over US$500,000 ($640,000), and stocks not within the Straits Times Index (STI).

They write: “We include S-REITs in our screen. Beyond Singapore, our discussion with industry contacts indicates mandates will be allowed to hold ASEAN ex-Singapore stocks, probably up to 40%.”

Since August 2024, Vantakaris, Foo, Kwok and Tan note that US dollar performance for their 18 chosen Singapore stocks and 10 Asean stocks have underperformed the 30-stock STI by 13% to 19%.

“The only period of outperformance was during the US 'Liberation Day' selloff, which saw less underperformance vs the large cap STI; however, this reversed with the recovery,” write the analysts.

Deploying $5 billion into the 18 Singapore stocks, they note, would constitute around three months buying and could change relative performance.

The team’s top picks for small cap Singapore stocks that could benefit from the inflow include ComfortDelGro(CDG), First Resources(FR), iFast Corporation (iFast), Parkway Life REIT (PREIT) and StarHub.

Additionally, their top large-cap index picks are Overseas-Chinese Banking Corporation (OCBC), Sembcorp Industries(SCI), Singapore Technologies Engineering(ST Engineering), CapitaLand Ascendas REIT(CLAR) and DFI Retail Group(DFI).

“We also like Keppel DC REIT (KDC REIT) which will be included in the STI on June 23. Otherwise, we see limited upside to our year-end STI target of 4,000,” write Vantakaris, Foo, Kwok and Tan.

Remaining picks include Mermaid Maritime(Mermaid), Centurion Corporation(Centurion Corp), Marco Polo Marine(MPM), Nam CheongLimited, UMS Integration (UMS) and Frencken Group(Frencken).

The analysts add: “We estimate the combined impact of MAS measures announced so far at lifting ADV by around 3% to 4%, all else equal.”

These benefits, they note, could be higher in future years should more initial public offerings (IPO) or secondary listings result from increased fund allocation, or if the $5 billion allocation becomes a regularly occurring event, with future follow up allocations.