Singapore’s Next 50 Targets Mid-Cap Growth

Singapore is re-engineering its equity landscape to reduce reliance on the banking heavyweights that have long defined the city-state’s market. The launch of the iEdge Next 50 Index marks a strategic shift, designed to direct capital toward mid-cap stocks and real assets. This new benchmark tracks the 50 largest and most liquid companies falling just outside the top 30 constituents of the Straits Times Index (STI), effectively creating a secondary tier for investors seeking diversification.

By carving out a distinct universe for mid-sized firms, the index offers a clearer pathway for capital to flow into sectors often overshadowed by the financial giants. Shekhar Jaiswal, head of equity research at RHB Singapore, noted that while products tracking the index are not yet live, the benchmark could eventually "create a true two-tier structure" for the market.

The composition of the Next 50 diverges sharply from the STI, which is heavily weighted toward DBS Bank, OCBC, and UOB. Instead, the new index is essentially a "yield-rich, real-asset and mid-cap growth basket," according to Jaiswal.

Real Estate Investment Trusts (REITs) constitute approximately 45% of the index’s weighting. This concentration includes trusts focused on logistics, data centres, and hospitality—sectors that align closely with global infrastructure demand and consumption trends. Consequently, the index offers a dividend yield of roughly 5.8%, significantly outpacing the STI’s 4.5%.

However, this structure introduces specific macroeconomic risks. The heavy reliance on real assets makes the Next 50 highly sensitive to global interest-rate shifts. Stephen Bates, a partner at KPMG in Singapore, observed that this concentration of 16 to 17 REITs is unusually high compared to mid-cap indices in other developed markets. While this boosts yield, it exposes the index to volatility should central banks maintain hawkish monetary policies longer than anticipated.

Beyond real estate, the index offers exposure to industrial, manufacturing, and telecommunication sectors. Yujun Lin, CEO of Interactive Brokers Singapore, emphasised that even before ETFs are launched, "new indexes help highlight and draw attention to specific groups of stocks."

This visibility is expected to drive improvements in corporate governance. To maintain their position in the index—and the potential capital inflows that come with it—companies will face pressure to improve financial disclosure and maintain sufficient free float. The index includes a liquidity-weighted version, which Jaiswal points out "rewards actively traded stocks," incentivising firms with thinner trading volumes to improve their market-making efforts.

While the index carries inherent risks, including lower liquidity and higher volatility typical of mid-cap equities, it represents a significant maturation of Singapore’s capital markets. Over 40% of the index’s exposure is tied to companies with operations outside Singapore, making it a proxy for broader Southeast Asian growth.

Currently, institutional products tracking the benchmark are absent. However, analysts believe that once a performance track record is established, ETFs will likely follow. Bates noted that such products would create "a natural avenue for sustained institutional capital flows," bringing Singapore in line with other developed markets that have successfully raised the profile of their mid-tier companies