BUDGET 2025: Equity market measures may fall short, analyst warns

Fund managers must distribute a portion of their profits as dividends.

The Singapore government has announced three key tax incentives to support the local equity market, but some analysts believe that these measures alone will not be sufficient to address the broader challenges facing the market.

Shekhar Jaiswal, analyst at RHB, said the corporate income tax rebate offers a 10% rebate for secondary listings with share issuance and a 20% rebate for primary listings.

The rebate is capped at $6m per year for companies with a market capitalisation of at least $1b and $3m for smaller firms. To qualify, companies must remain listed on SGX for at least five years and commit to local business investments and skilled employment growth.

The enhanced concessionary tax rate reduces the tax rate for newly listed fund managers to 5% from 10%. This applies to fund managers that meet certain conditions, including a five-year listing period, minimum professional headcount, and asset under management (AUM) thresholds.

Additionally, fund managers must distribute a portion of their profits as dividends, aligning with efforts to promote long-term market engagement.

The third measure introduces a corporate tax exemption on qualifying income for fund managers whose funds invest at least 30% of their AUM in Singapore-listed equities.

For existing funds, the qualification includes demonstrating an annual net inflow equivalent to 5% of the fund’s AUM. This incentive aims to encourage domestic investment, but its impact remains uncertain given the broader market conditions.

Despite these initiatives, analysts remain cautious. They argue that the tax incentives alone are insufficient to improve market breadth or boost liquidity, especially for small and mid-cap companies that are already struggling to attract investor interest.

The measures may not significantly drive new IPO listings or elevate local equity market sentiment, both of which are crucial for long-term market growth.

The outlook for the Singapore Exchange (SGX) remains neutral, with a target price of $12.80. Analysts expect earnings growth to moderate from FY2026, with performance closely tied to broader market sentiment.

Key drivers for SGX’s growth include an increase in IPO listings, successful new product launches, earnings-accretive acquisitions, and positive outcomes from the ongoing market review exercise.