Singapore's Mid-Cap Stocks: A Surge of Optimism or a Bubble Waiting to Burst?

In the first quarter of 2025, Singapore's mid-cap stocks experienced a remarkable surge, with average daily turnover (ADT) jumping 35% to $67 million. This surge, driven by significant institutional inflows, has sparked both optimism and skepticism among investors and analysts alike. But is this a sign of a robust and resilient market, or a bubble waiting to burst?



The surge in trading activity, with mid-cap stocks attracting $71 million in net institutional inflows year-to-date (YtD), is a stark contrast to the broader market's net institutional outflow of $1.4 billion. This disparity suggests that investors are selectively targeting mid-cap stocks for their potential growth and returns, while being more cautious about the broader market. But is this selective targeting a sign of a maturing market, or a symptom of a bubble?

The performance of top-performing mid-cap stocks, such as Yangzijiang Financial Holding, UOB Kay Hian Holdings, and Frasers Hospitality Trust, reflects broader trends in the Singaporean economy and global market conditions. Yangzijiang Financial Holding, for instance, saw its ADT surge to $14.1 million in 2025 from $2.4 million in 2024, with a 61% gain in share price and $94.3 million in net institutional inflows. This significant increase in trading activity and institutional interest indicates strong investor confidence in the financial services sector, which is a key component of Singapore's economy.

But is this confidence justified, or is it a result of a herd mentality, where investors are following the crowd rather than making informed decisions? The strong performance of Yangzijiang Financial Holding is attributed to its diversified asset allocation and gains from Singapore fund investments, which highlights the resilience and growth potential of the financial services sector in Singapore. But is this resilience sustainable, or is it a result of a temporary boom in the financial services sector?

The increased trading activity in Frasers Hospitality Trust, with its ADT climbing to $1.33 million from $400,000 in 2024, is indicative of the strong investor interest in real estate, particularly in the hospitality sector. But is this interest a sign of a recovering tourism industry, or a result of a speculative bubble in the real estate market?

The performance of mid-cap stocks in Singapore, with a 2% total return in 1Q25 following a 15% total return in 2024, suggests a stable and growing economy. But is this stability sustainable, or is it a result of a temporary boom in the mid-cap segment? The average Return on Equity (ROE) of 6.7% and an indicative dividend yield of 4.8% further support the notion of a robust and resilient economy. But is this resilience a result of strong fundamentals, or a result of a speculative bubble in the mid-cap segment?

The Singapore Commercial Credit Bureau's (SCCB) Business Optimism Index (BOI) climbing to +5.45 percentage points for Q1 2025 indicates a positive outlook for the economy, with sectors such as construction, transportation, and financial services showing optimism. But is this optimism justified, or is it a result of a temporary boom in these sectors?

The increased institutional inflows into mid-cap stocks present both opportunities and risks for the long-term stability and growth of the Singaporean stock market. While enhanced liquidity and improved market sentiment can foster growth, the dependency on institutional investors and sector-specific risks pose challenges. Long-term stability and growth will depend on sustained interest, strong fundamentals, and supportive regulatory policies.

But is the Singaporean stock market ready for this challenge, or is it a bubble waiting to burst? Only time will tell. But one thing is clear: the surge in mid-cap stocks is a sign of a maturing market, but it is also a reminder of the risks and challenges that lie ahead. Investors and analysts alike must remain vigilant and cautious, and not be swayed by the herd mentality. The future of the Singaporean stock market depends on it.