Rising SMID turnover and board lot reforms strengthens the case for Singapore

• SMID liquidity continued to deepen, with average daily turnover for existing constituents rising 83% since 1H25, outpacing share price gains and reinforcing market depth.

• AI-exposed SMIDs attracted strong institutional inflows, supported by strong electronics exports and accelerating global AI infrastructure investment.

• Board lot and custody reforms are set to lower market frictions, improving accessibility for both retail and institutional investors, particularly across Singapore's large-cap stocks.

• We maintain our positive view on Singapore’s equity market, supported by strengthening liquidity, structural AI tailwinds and continued market reforms across both blue-chip leaders and high-quality SMIDs.

SMID turnover signals deepening liquidity

Singapore's capital market revitalisation is showing little sign of slowing as it enters the second half of 2026. More importantly, the recovery is no longer confined to headline market activity but is becoming increasingly evident across the small- and mid-cap (SMID) universe, where strengthening liquidity is reinforcing the broader investment case.

SGX's Securities Daily Average Value (SDAV) rose 79% year-on-year to SGD 2.4 billion in May, the highest level since October 2007. Liquidity gains were even more pronounced within SMIDs (companies with market capitalisations between SGD 100 million and SGD 10 billion), where SDAV increased more than fourfold from a year earlier, comfortably outpacing the broader market.

The improvement extends well beyond a single month's data. According to SGX's 1H26 market update, Singapore's 240 SMIDs generated a combined average daily turnover (ADT) of SGD 696 million in 1H26, alongside an average total return of 13% across the cohort. Excluding the SGD 33 million contributed by newly listed companies, ADT for existing constituents rose steadily from SGD 362 million in 1H25 to SGD 663 million in 1H26. The 83% increase in trading activity comfortably exceeded the pace of share price appreciation over the same period, suggesting that liquidity is deepening rather than valuations being driven solely by rising share prices.

Related article: EQDP: The spark that Singapore's equity market needed — and why the momentum is here to stay

AI exposure provides a second structural tailwind

Improving liquidity is only part of the SMID investment story. A second, independent growth driver is emerging through Singapore's increasing exposure to the global AI supply chain. Unlike many regional equity markets, a meaningful proportion of Singapore's structural growth companies are listed within the SMID universe rather than the STI. Companies operating across semiconductor manufacturing equipment, precision engineering, data centre infrastructure and construction technology are well positioned to benefit from the global acceleration in AI infrastructure investment. As hyperscalers continue expanding AI-related capital expenditure, these companies stand to benefit not only from stronger domestic liquidity but also from structural demand across the global semiconductor ecosystem.

Institutional fund flows increasingly reinforce this trend. While non-REIT SMIDs attracted SGD 473 million of net institutional inflows during 1H26, the technology sector alone accounted for SGD 560 million. Technology and industrial companies also dominated the list of stocks recording the largest inflows relative to market capitalisation. Notably, SGX-listed semiconductor supply chain companies such as AEM, UMS Integration and Frencken Group ranked among the largest recipients of institutional inflows, reinforcing investors' growing preference for companies with direct exposure to the AI ecosystem.

Looking ahead, the policy backdrop remains supportive. As of early June 2026, SGD 2.6 billion of the Equity Market Development Programme (EQDP) remained available for deployment. A third batch of appointed managers is expected to be announced in the coming weeks, providing an additional source of institutional capital for Singapore equities. At the same time, the enhanced Grant for Equity Market Singapore (GEMS) scheme continues to broaden research coverage across the SMID universe, improving market visibility and facilitating greater institutional participation. Together, these initiatives reinforce the view that the recent improvement in liquidity is likely to be sustained, providing a stronger foundation for continued interest in Singapore's SMID universe.

Related article: Singapore's May NODX surges to 22-year high: AI integration runs deep, positive view maintained

Accessibility reforms lower market frictions

While SMIDs stand to benefit from improving liquidity and structural AI exposure, Singapore's large-cap stocks are supported through a different channel: improved market accessibility.

Beginning 5 October 2026, SGX will reduce the standard board lot size from 100 shares to 10 shares for securities trading above SGD 10. The initial phase covers 11 counters that collectively accounted for approximately 35% of total trading activity in 1H26, including DBS, OCBC, UOB, Keppel and SGX. The change substantially lowers the minimum capital required to invest in many of Singapore's highest-priced blue-chip stocks, reducing a longstanding barrier to retail participation.

The board lot reduction follows another important market structure enhancement. On 15 July 2026, SGX introduced a post-trade custody model that allows depository agents to hold SGX-listed securities through omnibus broker custody accounts, bringing Singapore's settlement framework in line with international market practice. The reform streamlines market access for global intermediaries by removing a longstanding operational friction associated with Singapore's custody framework.

Together, these initiatives improve accessibility for both retail and institutional investors. Lower board lots reduce the upfront capital required to invest in higher-priced blue-chip stocks, while the new custody framework makes Singapore's equity market more accessible to international brokers and institutional investors. As many of the STI's largest constituents trade above the SGD 10 threshold, they stand to be among the earliest beneficiaries of the revised board lot framework, broadening participation without altering the underlying investment case.

Positive view on Singapore maintained

Taken together, these developments reinforce our constructive view on Singapore’s equity market. SMIDs are benefiting from strengthening liquidity, growing institutional participation and structural AI exposure, while large caps stand to benefit from reforms that improve market accessibility and reduce longstanding barriers to participation. These complementary drivers broaden the investment opportunity across the market rather than concentrating it within a single segment.

More importantly, these developments are underpinned by structural rather than cyclical drivers. Continued policy support, improving market liquidity, and Singapore's deepening role as both a global AI semiconductor hub and regional wealth management centre reinforce the broader investment case for Singapore equities, supporting exposure across both blue-chip leaders and high-quality SMIDs.

For investors seeking exposure to Singapore equities, we continue to recommend the Amova Singapore STI ETF (SGX: G3B) for cost-efficient exposure to the STI, and the iFAST-Amova Singapore Equity A SGD for broader exposure across both the STI's blue-chip constituents and high-quality SMIDs positioned to benefit from improving liquidity and structural AI-driven growth.

Related article: Singapore Outlook 2H26: Yield, growth and revitalisation in one market

Declaration

For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold a NIL position in the abovementioned securities.

This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report, including all investment theses, ratings, price targets and conclusions, has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.