Singapore is one of Asia’s largest fund management centres, with assets under management approaching S$7 trillion, growing at an average of 7.5% annually over the past five years. By any measure of capital density, the city-state is extraordinarily rich. Yet that capital has historically flowed disproportionately into global mandates, regional private markets and the largest, most liquid Singapore-listed names, leaving a long tail of listed companies with trading volumes so thin that a single institutional order can distort the price for days.
The Difference Between Hosting Capital and Deploying It
Hosting asset managers, private banks and global investment firms does not automatically create liquidity for domestic listed businesses. Liquidity requires a meeting of willing buyers and sellers at a given moment, not merely the presence of capital somewhere in the system. When a stock trades only sporadically, the bid-ask spread widens to compensate market participants for the risk of holding an uncertain position. That wider spread becomes an implicit tax on every trade, which in turn deters participation, which further widens the spread. The result is a self-reinforcing cycle of illiquidity that no amount of headline assets under management can break on its own.
Market Making as a Circuit Breaker
The GEMS Market Making Grant is designed to interrupt that cycle at its mechanical core: the quote. By supporting appointed market makers in providing continuous two-sided quotations for around 80 eligible small- and mid-cap stocks, MAS aims to compress bid-ask spreads and reduce execution costs for investors who would otherwise avoid these counters entirely. The logic is straightforward: if the cost of trading falls, the pool of potential participants expands. A pension fund that previously could not justify the execution cost of building a position in a S$500 million market-cap company may reconsider when the spread tightens and a reliable quote is available. Market making does not create fundamental demand, but it can remove a structural barrier that prevents demand from expressing itself.
The Numbers That Show the Gap Is Narrowing—but Unevenly
Early data suggests the broader liquidity push is gaining traction. In FY2026, the daily average value of securities on SGX rose 35% to S$1.8 billion, the highest in 18 years, while total securities turnover increased by the same percentage to S$455.7 billion. More tellingly, daily average trading value in the small- and mid-cap segment jumped 155% to S$310 million, the highest since FY2014, and institutional net buying in that segment tripled to S$606 million. These are not trivial improvements. But they also reveal the scale of the starting problem: the small- and mid-cap segment’s daily turnover remains a fraction of the headline market’s activity, and the gains are measured against a very low base. For a deeper look at the execution-cost challenge and the structural barriers market makers face, The Edge Singapore’s analysis remains instructive: https://www.theedgesingapore.com/news/markets/wheres-liquidity.
The Risk of Confusing Quote Presence with True Depth
A screen filled with firm bids and offers is not the same as a liquid market. Liquidity has multiple dimensions: tightness (spread), depth (size available at the quote) and resilience (how quickly the market absorbs a large order without permanent price impact). A market-making grant can improve tightness relatively quickly. Depth and resilience depend on a broader base of genuine end-investors—index funds, active managers, retail participants and proprietary trading firms—choosing to allocate capital to these names. If the grant produces tighter spreads but no increase in underlying investor interest, the market may look healthier without becoming more functional. The durability test is whether liquidity survives the withdrawal of the incentive.
The Ecosystem Condition
Market making works best when it is embedded in a functioning ecosystem: research coverage that gives investors a reason to look, index inclusion that creates structural demand, and listing rules that ensure adequate free floats. MAS has acknowledged that the market-making grant is one measure among many, and the eligible stock list will be reviewed regularly to add counters that demonstrate the capacity to benefit from sustained support. The paradox of abundant capital and scarce liquidity will not be resolved by a single grant. But it can be narrowed if the grant is treated as a catalyst for participation rather than a permanent substitute for it.
