MAS Efforts to Revitalise Local Stock Market Show Promise

But analysts call for greater clarity on how asset managers will use allotted funds

- Benjamin Lim Correspondent and Sue-Ann Tan

Efforts to revitalise Singapore's equities market are showing promise, with the benchmark Straits Times Index reaching an all-time high of 4,273 points on July 24, following the latest announcements.

However, analysts caution that there is still a lack of clarity on how the appointed asset managers will execute their strategies to effectively support local companies and boost market liquidity.

This comes in response to the Monetary Authority of Singapore's (MAS) July 21 announcement allocating an initial $1.1 billion to three asset managers to invest in the Singapore stock market.

Avanda Investment Management, Fullerton Fund Management and JP Morgan Asset Management were appointed to manage the first $1.1 billion tranche under the $5 billion Equity Market Development Programme announced in February.

The move, taken to revive trading on the local stock market as well as draw new companies to list, signals that the Government is invested in building a more attractive capital market ecosystem and boosting liquidity on the Singapore Exchange (SGX), experts said.

Smaller companies that are not component stocks of the benchmark Straits Times Index (STI) have the most to gain.

"Small and mid-cap companies on SGX's mainboard and Catalist stand to benefit from a more vibrant capital market and broader investor base," said Ms Lee Khai Yinn, head of continuing sponsorship at SAC Capital.

"Improved visibility, liquidity and valuation will enable these companies to raise capital or pursue acquisitions using their shares at fair value to support future growth."

She added: "Beyond injecting liquidity, the deployment should also aim to stimulate trading activity in the market."

Mr Jason Saw, CGS International group head of investment banking, added that the asset managers have a dual responsibility: to generate returns and to support market liquidity.