Good afternoon.  Thank you to AIMA for having me. It is really a pleasure to be here.

2.    Let me get straight to what I think is one of the most important conversations our industry is, or should be having right now.

3.    Most of you here manage sophisticated portfolios and solutions and think deeply about risk. And we know that markets will always have to contend with policy shocks, geopolitical conflicts and sudden dislocations.

4.    The question that matters for portfolios is how exposed they are – structurally – when those shocks arrive.

5.    If you hold a global equity benchmark today, you are probably running one of the most concentrated macro exposures modern markets have produced.

6.    Seventy percent. That is the weight of US equities in the MSCI World Index as of late February this year. At the time of the global financial crisis in 2008, that number was closer to forty percent.

7.    This is a macro view that is embedded in this benchmark. Many investors hold the view that US innovation, capital formation and the market depth over there will continue to dominate global returns, and indeed they have been rewarded for more than a decade.

8.    But the question which I would like to put to the room is:

9.    Is that a view you are consciously choosing today, or are you just inheriting it from the benchmark?

10.    If we reverse engineer what the current benchmark says or imply, the market is pricing in roughly two and a half percentage points of annual outperformance for US equities relative to the rest of the world. That is a meaningful assumption, and one that sits above what history would suggest over longer cycles.

11.    The question is not so much about whether US equities can continue to outperform. The question is whether investors are fully aware of the assumptions embedded in their starting point.

12.    Benchmarks are built on market capitalisation, and they naturally extrapolate from the recent past. Where capital has concentrated becomes where capital continues to concentrate. The mechanism is self-reinforcing, right up until the moment conditions change.

13.    The risk is straightforward: the next decade may not resemble the last one, but our portfolios are positioned as if it will.

14.    What happens if global growth becomes more distributed, if capital formation spreads across regions as supply chains diversify and demographics shift?

15.    Data shows that a growing number of investors have begun to moderate the concentration embedded in their allocations.  

16.    Based on European data, global equity funds that exclude the United States have seen a spike in demand. European-listed global ex-US ETFs attracted about 1.7 billion US dollars in the first two months of this year. This is more than double the same period last year .

17.    Closer to home, we have also observed sustained and growing interest in Singapore dollar denominated investment products.

18.    If we look at our ETF market over the past year, net inflows into SGD-focused ETFs reached about 1.9 billion Singapore dollars, accounting for nearly two-thirds of total ETF inflows into the Singapore market over that period.

19.    Perhaps, the more useful question is how to express a more neutral stance that reduces concentration risk, without breaking portfolios obviously.  

20.    Even with a tight 1 percent tracking‑error constraint, moving toward neutrality shifts US weight from about 70 percent to the mid‑60s. And over a longer history, we have seen that more adaptive regional allocations have reduced volatility without sacrificing returns.

21.    For those investors thinking about diversification, Asia has become part of that conversation.

22.    According to the IMF, Asia today contributes more than half of global economic growth. The region represents a growing share of global savings, corporate activity and capital formation.

23.    Asian equity markets remain under-represented in many global portfolios relative to that economic footprint. That observation has been made before, and the standard response is that benchmarks reflect investable market capitalisation rather than GDP.

24.    That is fair enough. But the relationship between economic weight and market weight does change over time.  It depends for example, how the country is classified – whether it is a developed market, or an emerging market.

25.    Capital markets will develop and classifications will evolve, and the opportunity set changes.

26.    Most of you have already decided, in principle, that Asia warrants attention. How do you implement that diversification efficiently and at scale, given that Asia markets are not homogeneous?

27.    Can you build exposure to a region this diverse in regulatory structures, currency regimes and market depth? How do you do this at scale, with the operational precision that institutional mandates require?

28.    That implementation challenge has historically been real. The gap between the allocation decision and the execution reality has kept capital on the sidelines. What is encouraging is that the gap is closing.

29.    Diversification can only work in practice if investors can adjust exposures quickly, manage risk across multiple asset classes, and even operate across time zones without fragmenting portfolios.  This is where Singapore can play a meaningful role.

30.    Singapore’s financial markets have evolved: global investors are now able to manage Asia exposure across asset classes, be it equities, currencies, commodities and rates — within a single ecosystem.

31.    And our stock market here in Singapore itself has characteristics that many global portfolios are increasingly placing a premium in uncertain environments.

32.    For example our benchmark companies, or the STI companies, they often have strong balance sheets, disciplined capital allocation and a consistent dividend culture.

33.    The broader market also provides exposure to sectors that are structurally important to the Asian economy — financial services, infrastructure, commodities-linked companies and regional consumer businesses.

34.    The Singapore stock market has actually achieved record highs in the past year, and has been one of the best‑performing equity markets in Southeast Asia, with returns that have matched, and even surpassed in certain periods, US benchmarks, including the S&P 500.

35.    For investors seeking to diversify portfolios globally, the currency dimension has also become increasingly important.  The Singapore dollar is widely regarded as one of the more stable currencies in Asia, supported by Singapore’s monetary policy framework and strong external balance sheet.

36.    For Singapore, the question is how do we continue strengthening the financial market ecosystem so that it continues to remain relevant to global portfolios?

37.    Liquidity does not emerge by itself or by accident. Deepening a market requires sustained, deliberate capital commitment to the ecosystem itself.  

38.    Over the past few years, Singapore has taken significant steps to improve liquidity beyond the largest index constituents, and to broaden participation in the stock market.

39.    Through programmes such as the Government-led $9.5B (in aggregate) Anchor Fund and Equities Market Development Programme, Singapore is actively improving liquidity, market depth, and facilitating capital formation for companies seeking permanent capital.

40.    There is a fireside chat later on where one of the MAS executive directors will be here. He will be able to tell you more about considerations of the EQDP fund managers.

41.    But fundamentally, what has happened is that capital is being crowded in so that execution quality improves for everyone who follows.  

42.    We will enhance the market-making ecosystem for Singapore equities to improve market quality, alongside the deployment of the funds that I just mentioned, and the rolling-out of value unlock initiatives.

43.    We are beginning to see the early effects that this has on the market already. Investor sentiment has been reignited, and fund flows are proof of that.

44.    And this is not just about stocks.  We are also building the base for sophisticated equity-linked instruments and broadening our derivatives product shelf.  

45.    We launched the micro STI Futures a few days ago. This provides a more precise way to calibrate exposure alongside existing STI-linked products.  

46.    The STI is our Straits Times Index, and is our flagship benchmark equity index in our stock market.

47.    We introduced crypto perpetual futures last year to meet customer demand for well-regulated, secure and transparent digital asset exposure. And we will be rolling out Asian government bond futures in the coming weeks.

48.    And actually thinking further ahead, is there value for us to consider binary, or digital payout type structures for certain underlying events to support a different form of risk transfer?

49.    In closing, let me return to the idea I began with.

50.    Benchmarks describe the world as it was priced at a particular moment in time. Many of the reference points that we rely on were designed for an earlier economic structure — when industries were more stable, transitions take a bit more time, and risks were easier to isolate. This is no longer the market which we are operating in today.

51.    As such, global portfolios must prepare for the world that may emerge next. Capital is clearly increasingly shaped by the AI industrial revolution, energy transition, geo-economic fragmentation, as well as new sources of risk and opportunity.

52.    The investors who navigate this transition most effectively will be those who recognised the concentration risks we talked about, asked the harder questions, and had the infrastructure in place to act when the moment arrived.  

53.    The financial markets in Singapore will evolve to provide the tools and liquidity for investors to act, and act as a bridge between traditional markets and emerging structures.

54.    Thank you.