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Singapore Won’t Displace Hong Kong as a Financial Center

Hong Kong’s rapid isolation from the rest of the world has business executives, investors and expatriates asking whether Singapore will overtake the territory as Asia’s main financial center. If that’s the ambition, there’s a lot of ground to cover. A more realistic outcome is that the two locations work as complements, rather than competitors for global talent.

The situation in Hong Kong is deteriorating. Omicron’s spread in recent weeks has upended the government’s zero-Covid strategy, forcing it to impose ever more drastic containment measures as the hospital system teeters. The outbreak is now bigger than the surge in Wuhan at the start of the pandemic. Authorities have had to turn to Beijing not only for medical supplies, but also to help meet basic daily needs as produce disappeared from grocery shelves. One official said over the weekend that the government is in “full-on war mode,” while Chinese President Xi Jinping appears to be losing patience.

Singapore seems Edenic by comparison. After botching its initial response to omicron, the government has taken the latest outbreak in stride, easing requirements for quarantine and testing frequency even as case numbers soared. Though getting on a plane requires a dizzying amount of paperwork, travel is getting easier. Schools, thankfully, remain open. While official data don’t indicate the number of transplants from Hong Kong, anecdotal evidence from moving companies and LinkedIn data show that relocations to Singapore have risen.

Still, on a number of metrics that would define a financial center, the Southeast Asian city-state remains a laggard. Despite recent efforts to boost local stocks, the market is a graveyard. Average daily turnover in January was just S$1.2 billion ($890 million), compared with Hong Kong’s HK$128.6 billion ($16.5 billion) — which itself has been flagging — while the market capitalization of securities listed in the territory is eight times bigger. In 2021, a record year for Asian IPOs, companies raised just $2 billion in Singapore via initial public offerings versus $12.2 billion in Hong Kong. That could help explain why one of the most high-profile Southeast Asian startups — ride-hailing company Grab Holdings Ltd. — opted to list in New York last year. (2)

Singapore is more competitive when it comes to attracting wealth — not only from China, but also India, Indonesia and Malaysia. Assets under management in the city-state reached S$4.7 trillion ($3.5 trillion) at the end of 2020, compared with HK$34.9 trillion ($4.5 trillion) in Hong Kong.(1) While Singapore has taken steps to close that gap, including a law that makes it easier for family offices, hedge funds and private equity firms to set up shop, the government announced Friday it will start raising taxes on its wealthiest 1%. Hong Kong, meanwhile, isn’t standing still, and banks have been aggressively courting mainland money. Several have boosted hiring to cater to wealthy Chinese, who are taking advantage of programs that make it easier to invest across the border.


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