Singapore Won’t Displace Hong Kong as a Financial Center

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.                             In the more whizz-bang corners of finance, such as cryptocurrencies, the rivals are roughly neck-and-neck. Hong Kong has been cautious in its approach, with plans to lay out a regulatory roadmap by July. Singapore, by contrast, assiduously pitched itself as a crypto hub last year, but some high-profile efforts have stalled. In December, the local affiliate of the world’s largest crypto exchange, Binance Holdings Ltd., announced it would  wind down operations after pushback from officials, baffling the industry and dashing hopes the city-state would become the company’s global headquarters, the location of which hasn’t yet been publicly announced. A spokesman from the Monetary Authority of Singapore said that the central bank will adapt crypto rules “commensurate with the risks posed.” (Other global regulators have raised concerns about Binance in recent weeks.) 

A critical piece of the puzzle will be the ease of hiring foreign workers. Applying for a visa in Hong Kong is typically a straightforward, anxiety-free process that imposes relatively few demands on employers. Singapore has more stringent rules on recruitment of locals, and the government raised the minimum salary requirements for white-collar employees when it presented its latest budget. The economy is highly reliant on labor from abroad, with non-residents comprising 27% of a population of 5.5 million.                                   Singapore itself is deeply divided on the issue, which was the subject of a 10-hour debate in Parliament last year. In response to concerns aired by the opposition party, Manpower Minister Tan See Leng asked, “Do [they] think Singapore will forever be attractive to investors? Is there some magic water that draws global multinationals here? All this happens spontaneously?” The biggest strain on hiring may not be felt by large companies but boutique banks and smaller businesses that endeavor to set up shop with a suite of hand-picked expat employees.

Singapore stands to benefit as more businesses straddle both cities, and it’s doing a lot of the right things. But the city-state isn’t content to merely share its status as a financial capital — it wants to compete. So long as China remains a desirable market for businesses and investors, Hong Kong will be a vital portal. Bankers, for one, want to be close to their clients. As the territory spirals into crisis, though, the ability to live with Covid may start to trump such quaint logistics.                                                                                        (1) Even as China’s increased regulatory scrutiny of the technology sector has slowed the pace of IPOs and bruised markets in Hong Kong, it remains a desired destination for secondary listings among companies, including Alibaba Group Holding Ltd. and JD.com Inc. Rising geopolitical tensions with the U.S. have increased the threat of delistingfrom New York exchanges.