Singapore's 2026 Budget could provide a significant boost to the local stock market.
The expansion of the Equity Market Development Programme (EQDP) to S$6.5 billion means Singapore equities are poised for another wave of institutional support.
An earlier analysis of the initial S$5 billion EQDP concluded that while the stimulus represented a major vote of confidence for the Singapore Exchange (SGX), the tangible benefits for dividend investors would materialize gradually.
However, the 2026 Budget announcement has accelerated the outlook. The government is not merely maintaining its strategy; it is significantly increasing its commitment.
With an extra S$1.5 billion injection, the total funding for the program now reaches a substantial S$6.5 billion.
For individual investors, this expansion signifies more than just additional capital; it represents the necessary fuel for the "Next 50" initiative to gain momentum.
The Rationale for Expansion: Responding to Strong Demand
When the EQDP was first launched, some questioned whether institutional fund managers would have sufficient interest in focusing exclusively on Singapore equities. According to the Monetary Authority of Singapore (MAS), the response has been overwhelmingly positive.
The MAS reports that the initial S$3.95 billion has already been allocated to nine leading asset managers, including global firms like JPMorgan and local leaders like Fullerton. The decision to increase the fund by 30% points to a strong pipeline of high-quality applications. Professional capital is keen to enter the Singapore market, and the government is supplying the resources to support this interest.
Investment Focus: Tracking the "Next 50" Indices
To understand where this S$6.5 billion is likely to be invested, one should look to the iEdge Singapore Next 50 indices.
As previously noted, these indices track the 50 largest companies that follow the Straits Times Index (STI) blue-chip constituents.
These indices have already been outperforming the STI, and for valid reasons.
They represent a "sweet spot" in the Singapore market: companies that are sufficiently large to be stable, yet small enough to offer considerable growth potential and higher dividend yields.
While the STI offers a yield of approximately 4.1%, the Next 50 index has maintained a yield near 5.85%.
The EQDP expansion explicitly directs fund managers to anchor capital in these mid-cap companies. This sets in motion a "Flywheel Effect":
Capital Inflow: Managers funded by the EQDP purchase shares in Next 50 companies.
Improved Liquidity: Increased trading volumes make it easier for large institutions to invest.
Valuation Re-rating: Heightened demand pushes stock prices higher, reducing the valuation gap between mid-caps and blue chips.
Stocks to Watch: Potential Beneficiaries
The "Next 50" list includes several high-quality companies now receiving increased attention.
Infrastructure Plays: NetLink NBN Trust and ComfortDelGro are significant components of the new index. Their consistent cash flows make them attractive targets for managers seeking stability alongside growth, in line with the EQDP's objectives.
The REIT Segment: While the STI contains the largest real estate investment trusts, the Next 50 includes prominent names like Suntec REIT and Keppel REIT. These are often among the first to benefit when institutional liquidity flows into the mid-cap sector.
New Economy Companies: The inclusion of iFAST Corporation and NTT DC REIT indicates the stimulus also aims to support Singapore's shift towards digital infrastructure and wealth management platforms.
A Key Consideration: Fundamentals Drive Dividends
Despite the optimistic outlook, a fundamental principle must be reiterated: dividends are paid from company earnings, not government initiatives.
A S$6.5 billion stimulus can elevate a stock's price, but it does not automatically resolve underlying issues in a weak business model.
For income-focused investors, the objective is to identify companies that will utilize this new liquidity to reinforce their financial positions or finance strategic expansion.
A rising share price is beneficial, but sustainable and growing dividends are the foundation for long-term wealth creation.