Opinion

Singapore Needs a Japan-Korea Value-Up Program to Sustain Market Rally

Published

2 weeks ago

February 9, 2026

Singapore’s S$5 billion EQDP has sparked a 27% market rally. Now, a Japan-Korea inspired value-up program could unlock deeper shareholder value and sustain the STI’s momentum into 2027 and beyond.

You might recall the buzz when Singapore’s Monetary Authority unveiled its audacious S$5 billion Equity Market Development Programme in February 2025. With hindsight, it was inevitable—a bold bet on liquidity and local fund management to revive a market that had languished in the shadows of Hong Kong and Tokyo for too long. Fast forward to February 2026, and the Straits Times Index (STI) is trading near record highs around 4,975 points, up 27.79% year-over-year. The EQDP has delivered, at least in its first chapter. Yet as Singapore’s equity market basks in this newfound vibrancy, a crucial question looms: what’s next?

The answer may lie not in more capital injections, but in a complementary reform playbook borrowed from Asia’s recent success stories—Japan’s corporate governance revolution and South Korea’s Value-Up Program. These frameworks have unlocked billions in shareholder value by compelling companies to focus on capital efficiency, return on equity (ROE), and transparent communication with investors. For Singapore, introducing a similar value-up initiative could be the catalyst to sustain the STI’s momentum, deepen institutional investor engagement, and address the structural inefficiencies that have kept valuations subdued despite strong fundamentals.

The EQDP: Audacious, But Not Sufficient

Singapore’s Equity Market Development Programme deserves credit for its ambition and execution. Launched by the Monetary Authority of Singapore (MAS) and Financial Sector Development Fund, the S$5 billion EQDP channels government capital into funds managed by asset managers with proven track records in Singapore equities, particularly small and mid-caps. By late 2025, S$3.95 billion had been allocated across nine managers, including heavyweights like BlackRock, JPMorgan Asset Management, and local champions Fullerton Fund Management.

The program’s ripple effects have been tangible. Daily trading volumes have picked up, IPO activity shows signs of life, and the STI’s 27% gain in 2025 outpaced most regional peers. In November 2025, MAS also unveiled a S$30 million “Value Unlock” package to help listed companies strengthen investor engagement—a positive nod toward shareholder-centric reforms.

Yet for all its merits, the EQDP is fundamentally a demand-side intervention. It pumps liquidity into the market and incentivizes fund managers to deploy capital, but it stops short of addressing the supply-side challenge: how do you get Singapore-listed companies to unlock latent value, improve capital allocation, and prioritize shareholder returns? This is where Japan and Korea’s experiences become instructive.

Japan’s Playbook: From Malaise to Market Resurgence

Japan’s equity market was the poster child for stagnation for decades. The Nikkei 225 languished below its 1989 peak until recently, weighed down by cross-shareholdings, low ROE, and a corporate culture that hoarded cash rather than returning it to shareholders. Then came the Tokyo Stock Exchange’s March 2023 directive—a watershed moment that urged over 3,000 listed companies to disclose plans for raising capital efficiency above their weighted average cost of capital (WACC).

The results have been remarkable. Japan’s Nikkei 225 surged more than 25% in 2023, breaking multi-decade records, and continued its rally into 2024. By late 2024, 86% of companies in the TSE’s Prime market had submitted improvement plans—up from just 49% in December 2023. Japanese firms collectively bought back approximately ¥960 billion (US$65 billion) of stock in 2023, a record for the fourth consecutive year, while dividend increases hit their second-highest level since 1985.

Crucially, the reforms weren’t punitive—they were principle-based. Companies with price-to-book (P/B) ratios below 1.0x were publicly named and encouraged to explain their strategies for value creation. The TSE created incentives for disclosure and penalized laggards through reputational pressure and potential delisting from the Prime market. Institutional investors, emboldened by stewardship codes, began withholding votes from directors at companies with poor governance—a sharp departure from Japan’s historically passive shareholder culture.

The lesson? Government-led nudges, combined with exchange-driven accountability and transparent benchmarking, can reshape corporate behavior and reignite investor confidence.

Korea’s Value-Up Gambit: Tackling the Discount Head-On

South Korea faced a similar conundrum—chronic undervaluation despite hosting world-class companies like Samsung, Hyundai, and SK Hynix. The so-called “Korea Discount” saw the KOSPI trading at a P/B ratio below 1.0x, lagging Japan’s 1.5x and Taiwan’s 3.4x. Family-controlled conglomerates (chaebols) prioritized control and cash hoarding over shareholder returns, partly due to punitive inheritance taxes calculated on company valuations.

In February 2024, South Korea’s Financial Services Commission launched the Corporate Value-Up Program, inspired directly by Japan’s reforms. The program encourages listed companies to voluntarily disclose multi-year plans targeting ROE improvement, capital efficiency, and enhanced shareholder returns. Tax incentives, a dedicated “Korea Value-Up Index” launched in September 2024, and revised stewardship codes provide carrots; reputational pressure and exclusion from benchmarks serve as sticks.

Early results are mixed but promising. By February 2025, 114 companies had participated, and treasury stock cancellations surged 33% from 2022 to 2023 in response to activist pressure. The KOSPI’s performance improved, though political headwinds and chaebol resistance have slowed momentum. Still, the program signals a long-term commitment to aligning corporate behavior with global governance standards.

Singapore’s Case: Strong Fundamentals, Persistent Valuation Gap

Singapore’s equity market shares some structural similarities with pre-reform Japan and Korea, but with unique nuances. The STI trades at a P/B ratio around 1.1x—lower than Japan’s post-reform 1.4x and far below markets like the U.S. or India. Many Singapore-listed firms, particularly government-linked companies (GLCs) and family-controlled entities, exhibit conservative capital allocation, modest dividend payouts, and limited share buybacks despite strong cash flows.

Take DBS Group Holdings, Singapore’s largest bank. It generates robust returns and pays steady dividends (yielding around 5-6%), yet its valuation multiples remain subdued compared to regional banking peers. Similarly, Singapore Technologies Engineering, Keppel, and CapitaLand Investment—all quality franchises—trade at discounts that don’t fully reflect their strategic positioning or balance sheet strength.

Why the disconnect? Part of it is liquidity—Singapore’s market capitalization is dwarfed by Hong Kong and Tokyo, and foreign institutional participation has historically been muted. But another factor is governance: many companies lack explicit shareholder return frameworks, transparent capital allocation policies, or engagement mechanisms that activate investor interest.

The EQDP addresses liquidity by seeding capital into funds focused on Singapore equities, especially small and mid-caps. Fullerton Fund Management’s Singapore Value-Up fund, launched in October 2025 as the first retail offering under EQDP, is a positive step. Yet without a systemic push to improve corporate governance and capital efficiency across the broader market, the gains may plateau.

What a Singapore Value-Up Program Could Look Like

Drawing from Japan and Korea, a Singapore-style value-up program could include the following pillars:

1. Disclosure Requirements for Capital Efficiency
The SGX could mandate that all companies with a P/B ratio below 1.0x (or those in the bottom quartile for ROE) disclose multi-year plans to improve capital efficiency. This isn’t about shaming—it’s about transparency. Companies would outline specific targets (e.g., ROE above cost of equity within three years) and annual progress updates, similar to Japan’s TSE approach.

2. Tax Incentives for Shareholder Returns
Singapore already offers tax rebates for new listings under the EQDP framework. Extending this to companies that commit to sustained dividend growth or share buybacks could incentivize action. Korea’s model of offering enhanced corporate tax deductions for value-up participants could be adapted.

3. Creation of a Singapore Value-Up Index
Mirroring Korea’s September 2024 launch of the Korea Value-Up Index, Singapore could establish a benchmark tracking companies demonstrating strong capital discipline, consistent shareholder returns, and improving ROE. Pension funds, including the Central Provident Fund, could be encouraged to allocate portions of their portfolios to this index, creating a virtuous cycle of capital flowing to well-governed firms.

4. Strengthened Stewardship and Proxy Engagement
Singapore’s institutional investors—sovereign wealth funds, government-linked entities, and asset managers—should play a more active stewardship role. Japan’s success owed much to investor activism and proxy battles, where activists successfully placed directors on boards and pushed for cash repatriation. Singapore could revise its stewardship code to explicitly encourage voting against directors at companies with poor governance or stagnant shareholder returns.

5. Annual “Value Creation Forum”
MAS and SGX could host an annual forum where listed companies present their capital allocation strategies to institutional investors, modeled on Japan’s Corporate Governance Forum. Public recognition for leaders—and scrutiny for laggards—would create reputational incentives.

Risks and Pushback: Learning from Korea’s Struggles

Korea’s experience offers cautionary lessons. Despite the Value-Up Program’s ambition, political uncertainty and chaebol resistance have dampened momentum. The left-leaning opposition’s parliamentary victory in 2024 raised doubts about tax incentives, while family-controlled conglomerates remain wary of reforms that could dilute control or trigger higher inheritance taxes.

Singapore faces analogous challenges. Government-linked companies (GLCs) account for a significant share of the STI’s market cap, and some may resist external pressure to alter long-standing capital allocation practices. Family-controlled firms, particularly those in real estate and commodities, may view enhanced disclosure as intrusive. Regulators must strike a balance—nudging without coercing, incentivizing without penalizing unduly.

Moreover, not all companies need to “unlock value” in the same way. REITs, for instance, already distribute most of their cash flows by mandate. For growth companies reinvesting for scale, lower dividend payouts may be justified. A one-size-fits-all approach risks stifling legitimate corporate strategies.

The Timing Is Right

Singapore’s equity market is at an inflection point. The EQDP has injected momentum, the STI is near record highs, and GDP growth of 4.8% in 2025 underscores economic resilience. Yet without a second-order reform targeting corporate behavior, the rally could stall. Global investors, spoiled for choice amid recovering U.S. tech valuations and China’s reopening narrative, need more than liquidity—they need confidence that Singapore-listed companies will actively work to enhance shareholder value.

Japan’s experience shows that coordinated, principle-based reforms can catalyze a multi-year bull market. Korea’s journey, though incomplete, demonstrates that even imperfect programs can shift corporate culture. For Singapore, the opportunity lies in crafting a value-up program that reflects local realities—respecting the role of GLCs, accommodating diverse ownership structures, and leveraging the city-state’s reputation for regulatory clarity and execution.

MAS’s December 2025 announcement of the “Value Unlock” package, including grants to strengthen investor communications, hints at this direction. But grants alone won’t suffice. What Singapore needs is a comprehensive framework—exchange-driven disclosure mandates, tax incentives, a benchmark index, and empowered institutional stewardship—that aligns the interests of companies, investors, and regulators around a shared goal: sustainable value creation.

Conclusion: From Liquidity to Legacy

The EQDP was a shot in the arm—necessary, timely, and effective. But as any seasoned investor knows, momentum without fundamentals is fleeting. To ensure the STI’s gains are durable and that Singapore’s equity market evolves into a genuine destination for global capital, policymakers must tackle the harder question: how do we get companies to consistently prioritize shareholder value?

Japan and Korea have shown the way. Their value-up programs aren’t perfect, but they’ve catalyzed meaningful change—higher ROE, increased buybacks, better governance, and ultimately, higher valuations. Singapore has the institutional capacity, regulatory credibility, and market sophistication to design an even more effective version.

The next leg-up for Singapore’s market won’t come from more EQDP allocations alone. It will come from companies embracing transparency, improving capital efficiency, and rewarding shareholders—not because they’re forced to, but because the incentives and reputational stakes make it the rational choice. That’s the promise of a Singapore Value-Up Program. And with the STI already surging, the time to act is now.

Sources:

The Economy