The Resilience Premium: Why Small and Mid-Cap Stocks in Singapore Are Outperforming in 2025

In 2025, Singapore's small and mid-cap stocks are defying conventional wisdom. While global markets grapple with trade tensions and rate uncertainty, the Monetary Authority of Singapore (MAS) has engineered a liquidity tailwind that is fueling a renaissance in under-the-radar equities. This is not a fleeting trend but a structural shift driven by policy innovation, economic diversification, and a contrarian investor psychology that rewards patience and conviction. For value investors, the current environment mirrors the philosophy of Hyundai's Chung Ju-Yung: relentless execution in the face of adversity, where resilience becomes a competitive advantage.

The MAS-Driven Liquidity Surge

The cornerstone of this outperformance is the MAS' Equity Market Development Programme (EQDP), a S$5 billion initiative launched in July 2025 to deepen liquidity in the local equity market. By allocating S$1.1 billion to asset managers like Fullerton Fund Management and Avanda Investment Management, the MAS has catalyzed institutional flows into small and mid-cap stocks. The results are striking: the FTSE ST Mid and Small Cap Index surged 9% in Q3 2025, outpacing the Straits Times Index (STI) by 2.2 percentage points.

This liquidity boost has unlocked valuations long suppressed by thin trading volumes. For example, UMS (UMS.SI) now trades at a 23.9 P/E ratio—more than double its 10-year average—while Frencken (FRE.SI) has seen its P/E rise to 15.7 from 11.6. These metrics reflect a market recalibration, where institutional investors are no longer shunning smaller stocks but actively seeking them for their growth potential.

Economic Diversification as a Catalyst

Singapore's 2025 economic strategy is not just about liquidity—it's about redefining the nation's growth engine. The government's focus on advanced manufacturing, AI, and green infrastructure has created fertile ground for small and mid-cap players.

• Technology: The inclusion of Venture Corporation (V32.SI) in the STI marked a symbolic shift toward tech-driven growth. With S$2.2 billion allocated to the National Productivity Fund (NPF), AI adoption is accelerating. For instance, Coca-Cola's Singapore plant leveraged AI to boost throughput by 28% and cut emissions by 34%, showcasing the scalability of small-cap tech solutions.
• Industrials: The National Robotics Programme (NRP) and RIE2025 initiatives are driving demand for automation and precision engineering. Small-cap firms like Sanli Environmental (SNE.SI) have capitalized on this, raising S$40 million via a share placement to expand its industrial waste management services.
• Property: Green finance and smart infrastructure are reshaping real estate. The Green Plan 2030 has spurred demand for eco-friendly logistics hubs and data centers, with mid-cap developers like CapitaLand Commercial Trust (C31.SI) benefiting from a 12% increase in occupancy rates in Q3 2025.

Investor Psychology: The Contrarian Edge

The current outperformance of small-cap stocks is not purely policy-driven—it's also a function of behavioral shifts. As global interest rates decline, investors are fleeing overvalued large-cap equities and hunting for yield in smaller, high-conviction plays. This mirrors Chung Ju-Yung's approach to Hyundai's rise: identifying undervalued assets and executing with discipline.

For example, iFast Financial (I35.SI), a fintech firm, has seen its institutional ownership jump from 35% to 52% in six months, driven by its AI-driven wealth management platform. Similarly, Valuetronics (V38.SI), a semiconductor materials supplier, has attracted S$180 million in Q3 inflows, reflecting its role in the AI chip supply chain. These stocks, once overlooked, now trade at premiums due to their alignment with Singapore's innovation agenda.

The Resilience Premium: A New Paradigm

The resilience premium in Singapore's small and mid-cap market is not without risks. Global macroeconomic shocks—such as renewed trade wars or a U.S. recession—could reverse liquidity flows. However, the structural support from MAS and the government's long-term economic vision create a buffer. For instance, the Enterprise Compute Initiative (US$111.9 million) and Quantum Computing Fund (US$224 million) are designed to future-proof the economy, ensuring that small-cap firms remain competitive in a tech-driven world.

Investment Advice: Focus on Fundamentals

For contrarian investors, the key is to identify stocks with durable moats and policy tailwinds. Look for:
1. Strong EBITDA margins and improving free cash flow, as seen in Venture Corporation.
2. Alignment with national priorities, such as green infrastructure or AI adoption.
3. Low float sizes, which amplify liquidity gains from institutional inflows.

Avoid speculative plays in sectors like pharmaceuticals or U.S. dollar-sensitive industries, which remain vulnerable to trade policy shifts. Instead, prioritize companies like UMS or Frencken, which have demonstrated resilience through operational efficiency and strategic R&D.

Conclusion: The Chung Ju-Yung Paradox

Hyundai's founder once said, “If you want to go fast, go alone. If you want to go far, go together.” In 2025, Singapore's small and mid-cap stocks are embodying this ethos. The MAS' liquidity injections, coupled with economic diversification and a contrarian investor mindset, have created a rare window for under-the-radar equities to outperform. For those willing to embrace the resilience premium, the rewards could be substantial—but only for those who execute with the discipline of Chung Ju-Yung.