Interest in SGX-listed small and mid-cap stocks returning, but analysts flag overvalued tech counters

[SINGAPORE] Interest in Singapore’s small and mid-cap (SMID) stocks is showing signs of revival. But as the market returns to this space ahead of the earnings season, some analysts are suggesting that investors look beyond the heavily chased technology sector.

Turnover growth in the SMID segment – generally listcos with between S$100 million and S$10 billion in market capitalisation – outpaced market returns in the first half of 2026, an update by the Singapore Exchange (SGX) on Wednesday (Jul 1) showed.

The 240 SMID stocks generated S$696 million in average daily turnover, and averaged 13 per cent in total returns.

The bourse operator noted that the “increase in trading activity exceeded the pace of share price appreciation”, adding that this was the result of “stronger investor participation and deeper liquidity, rather than solely higher share prices”.

Despite improved liquidity and valuations in the market, CGS International (CGSI) noted a “diverging performance” between large-cap and SMID stocks since the Middle East crisis broke in late February.

Macroeconomic uncertainty favoured “large-cap, high-beta stocks over the small-mid cap stocks that present a higher alpha”, CGSI said in a strategy note on Jun 24. It defines small companies as those with under US$2 billion in market cap.

“Easing oil prices suggest the global market is leaning into the ‘worst is over’ narrative in the Middle East crisis,” it added.

“However, the outperformance of large-cap stocks against small-mid cap stocks in Singapore, with preference for beta over alpha, suggests investors’ confidence has yet to return.”

With the upcoming half-year results expected to provide better earnings visibility, CGSI said that it expects opportunities for investors to rotate from its large-cap alpha picks into its SMID alpha picks.

Tech domination

Much of the institutional net buying in the first half of the year was selective, SGX noted, adding that technology and industrial stocks dominated.

The technology sector alone booked S$560 million in net institutional inflows.

SGX attributed this to investor preference for semiconductor, engineering, aviation, infrastructure and digitalisation-related exposures.

CGS International said that the tech rally was driven by a “structural reset in earnings expectations” as demand for artificial intelligence is now “feeding directly into SGX-listed technology names, rather than remaining a broad global semicon read-through”.

CGSI sees reason to turn more constructive on the sector, but analysts broadly acknowledged that valuations for some counters have been stretched above historical averages.

UOB Kay Hian (UOBKH) addressed strong investor concern in a June retail webinar about “stretched tech valuations and IPO timing”, and cautioned against these valuations. It also expressed a preference for cheaper SMID names with clearer earnings visibility.

What to watch

In a strategy note on Jun 29, UOBKH analysts noted a SMID buyback wave in June: That month, seven SMIDs executed open-market repurchases totalling roughly S$5.6 million.

For analysts at UOBKH, these repurchases – at prices well below the levels earlier this year – reflect a “sector-wide judgment by boards that SMID valuations have overcorrected”, and a stronger conviction among managements about deploying their balance sheets at prices they considered low.

John Cheong, a UOB Kay Hian analyst, told The Business Times: “The mispricing is becoming bigger for the SMIDs versus the large caps, given the dismal performance of SMIDs versus the STI, which is near a record high.

“My view is that the SMIDs that have strong fundamentals, which are willing to continuously enhance shareholders’ value, should outperform over time.”

UOB Kay Hian cited Food Empire , which led the June buyback wave by repurchasing 0.93 million shares. The brokerage views Food Empire as a top pick for its “strong growth momentum, record revenue performance and successful Asia-led expansion”.

Its other top SMID picks on Jun 29 were Valuetronics , Pan-United and UltraGreen.ai . Its analysts also named Beng Kuang Marine and Huationg Global at the retail webinar.

CGSI’s SMID alpha picks are CSE Global , Info-Tech Systems , Marco Polo Marine , and Pan-United.

Sustaining the interest

Geoff Howie, SGX market strategist, said that the renewed interest in SMIDs is “likely to persist, as long as liquidity continues to improve, research coverage broadens, earnings growth remains supportive and market reforms continue to attract new participants”.

“Momentum could fade if trading activity weakens, earnings disappoint, global risk appetite deteriorates or the pipeline of fresh listings and corporate activity slows,” he added.

Stronger inflows, additional policy initiatives and further valuation reratings could extend and accelerate the trend.