MAS' S$5 billion investment fund set to lift undervalued, small-cap stocks: analysts
But analysts caution that the initiative's success in spurring the equities market will depend on how these managers execute the mandate and utilise resources for long-term market growth.
The Monetary Authority of Singapore (MAS) will inject a combined initial sum of S$1.1 billion to the three asset managers – Fullerton Fund Management, JP Morgan Asset Management and Avanda Investment Management. Each is likely to take a different approach.
Fullerton Fund Management and Avanda Investment Management on Monday announced that they will launch new funds focused on Singapore equities.
Fullerton Fund Management's Singapore equities unit trust will be invested in stocks listed on the Singapore Exchange (SGX), with exposure to stocks across all market capitalisations. Meanwhile, the Avanda Singapore Discovery Fund will focus on small and mid-cap stocks across the themes of 'value-up, local champions and turnaround'.
Key factor
Divya Doshi, managing director of sales for Asia and the Middle East at global investor services group IQ-EQ, told The Business Times that while MAS chose asset managers with institutional strength, the success of the EQDP will come down to 'how these managers execute on the mandate and contribute to long-term market development'.
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Luke Lim, managing director at brokerage Phillip Securities, believes it is important that the managers fulfil MAS' objectives using its valuable resources. These include improving liquidity with significant allocation to SGX-listed small and mid-cap stocks.
He said: 'Even before the deployment of EQDP, we have seen a major rally and re-rating of SGX-listed small to mid-cap stocks. There is now a pool of liquidity that will invest in undervalued small to mid-cap stocks, thereby improv(ing) the price discovery of the entire sector.'
Jason Saw, group head of investment banking at brokerage CGS International, thinks the positive momentum will continue for small and mid-cap stocks. He noted that the market has already begun reacting positively to the MAS announcement, with many undervalued stocks seeing improved valuations.
'It is all about the marginal buying, and we think it will move the market,' he added.
Doshi anticipates that the newly appointed managers will likely focus on small and mid-cap equities, growth-stage companies, and sectors that align with Singapore's strategic priorities, including sustainability, fintech and digital infrastructure.
These areas are expected to play a central role, given the EQDP's goals to deepen liquidity, improve price discovery and broaden investor participation.
The three managers have 'proven track records in managing Singapore equities, particularly in the small and mid-cap segments', noted Doshi. However, each may possibly approach the mandate in its own way.
'Some managers may initially allocate conservatively, to build performance credibility before venturing into less-liquid or higher-risk segments,' he added.
'Promising start'
Doshi noted that MAS' selection 'reflects a deliberate and strategic choice' – one that is likely to instil confidence due to the managers' strong reputations and well-aligned strategies, particularly in addressing under-researched market segments.
'Importantly, their credibility and performance history could help attract third-party capital, including from international investors, amplifying the impact of MAS' initial S$5 billion commitment,' he said.
However, whether it moves the needle immediately remains to be seen, he added. 'Without visibility into fund size, deployment timelines or specific mandates, the announcement may be seen as a promising start rather than a transformative shift.'
Doshi believes the real impact will depend on how these managers engage with under-researched stocks, support initial public offering pipelines, and drive liquidity in segments that have historically been overlooked.
Meanwhile, Saw expressed confidence that a significant portion will be deployed to the Singapore market, calling it a positive development for all stakeholders and market participants across the institutional, high-net-worth and retail segments.
He noted that the fund managers will 'have a duty to generate returns within a broader mission of enhancing liquidity on the Singapore Exchange'. As a result, well-run, undervalued companies with strong governance are likely to see better valuations soon, he added.
Similarly, Maybank Securities believes that small and mid-cap companies with stronger corporate governance credentials are likely to attract a disproportionate share of investments from the investment boost. These include semiconductor manufacturer AEM, Nanofilm Technologies International and air cargo handler Sats.
Additional reporting by Navene Elangovan
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