Singapore’s Next 50 could draw eyes away from bank-heavy STI

It’s a yield-rich, real-asset and mid-cap growth basket.

The iEdge Next 50 Index, Singapore’s newly launched equity benchmark, may push more investors toward mid-cap stocks as the city-state looks to broaden activity beyond the Straits Times Index’s blue-chip heavyweights.

The index tracks the 50 biggest and most liquid companies below the STI’s top 30 constituents. By carving out a defined mid-cap universe and offering both market-cap and liquidity-weighted versions, the benchmark gives investors a clearer way to access firms outside the banks and real-estate giants that dominate Singapore’s stock market.

“In the short term, the introduction of the new index is likely to reshape perceptions of Singapore’s equity market, broadening the story beyond the 30 STI components,” Shekhar Jaiswal, head of equity research at RHB Singapore, told Singapore Business Review. The iEdge Next 50 could eventually “create a true two-tier structure” with more consistent research coverage and investor flow, he added

Products tracking the index remain absent, but analysts said a mid-cap exchange-traded fund is likely once performance builds a track record.

“Once more people are familiar with and confident in its performance, ETFs tracking the index may be introduced, creating a natural avenue for sustained institutional capital flows into non-STI companies,” he said.

Other markets have long operated with established mid-cap benchmarks, and analysts say Singapore is catching up.

“This is going to attract investor interest,” Stephen Bates, a partner and head of deal advisory at KPMG in Singapore, said via Zoom. It’s consistent with what developed markets elsewhere have done to raise mid-cap visibility, he added.

Interactive Brokers Singapore CEO Yujun Lin said inclusion in a benchmark already puts a spotlight on a market segment, even before any tracking products come to market.

“New indexes help highlight and draw attention to specific groups of stocks,” he said in an emailed reply to questions.

The benchmark’s composition diverges sharply from the STI, which continues to be dominated by DBS Bank Ltd., Oversea-Chinese Banking Corp. and United Overseas Bank Ltd., as well as Singapore Telecommunications Ltd. and a handful of large real estate investment trusts (REIT).

The Next 50 tilts heavily toward real assets. Jaiswal estimates that Singapore REITs make up about 45% of its weight, giving the index higher sensitivity to interest-rate shifts.

The cluster includes logistics, data centre and hospitality trusts—sectors aligned with consumption and infrastructure demand.
It’s effectively a yield-rich, real-asset and mid-cap growth basket, Jaiswal said.

Governance expectations

Bates said the concentration—16 to 17 REITs—is unusually high compared with mid-cap indexes overseas. That weighting lifts dividends: the index yields roughly 5.8%, above the STI’s 4.5%.

Beyond real estate, Lin said the index includes a broader mix of industrial, manufacturing and telecommunication companies, sectors that have limited presence within the STI’s big-bank-led structure.

Analysts expect index inclusion to influence corporate behaviour over time, though not immediately. More investors monitoring stocks tends to push firms toward better disclosure and governance.

Companies would need to maintain sufficient free float and liquidity to remain in the index, Jaiswal said.

Bates added that as oversight increases, “the overall level of investor scrutiny is higher,” often prompting improvements in reporting or board engagement.

Lin said visibility alone brings pressure. “Index inclusion heightens visibility, and the influx of capital and liquidity incentivises continued inclusion,” he added.

The index’s liquidity-weighted version adds another layer of discipline. “A liquidity-weighted benchmark rewards actively traded stocks with higher index weightings,” Jaiswal said. The feature may encourage firms with thin trading to step up investor outreach or market-making efforts.

Bates said the index structure also lowers barriers for retail and institutional investors alike, offering diversified exposure without the need to pick individual names.

Lin noted that traditional market-cap weighting remains widely accepted because of its simplicity and low cost, adding that market cap and liquidity are typically correlated.

The index carries several risks that stand apart from the STI. The REIT-heavy structure raises rate-sensitivity. Smaller constituents may face sharper price swings and lower liquidity.

“You might see greater price swings,” Bates said, pointing to uneven liquidity across components.

Lin added that mid-caps inherently carry more volatility. “Small-to-mid cap companies may be subject to lower liquidity and higher price volatility,” he said. These characteristics could complicate the eventual creation of ETFs.

Despite the limitations, analysts say the benchmark marks progress in Singapore’s bid to diversify its equity market. Bates called it aligned with broader market-development initiatives, whilst Lin noted its regional reach: more than 40% of its exposure comes from companies with operations outside Singapore.

He said that makes the index a useful window into growth-oriented firms across Southeast Asia and beyond. Analysts expect it to gain relevance as investor familiarity improves and potential ETF launches draw fresh flows.