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Is Singapore Replacing Hong Kong as Asia's Financial Hub?

Is Singapore Replacing Hong Kong as Asia’s Financial Hub?

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  • Post last modified:July 29, 2022

After the harassment of Hong Kong’s mass protest and the implementation of the National Security Law, the emigration wave in the city has sounded the alarm. In 2020, Hong Kong lost about 93,000 residents, the city’s first recorded population squeeze in 60 years. In the first quarter of this year, the Immigration Department recorded a net outflow of more than 140,000 people.

International businesses are leaving Hong Kong, too. As of June 2021, there were only 254 US companies with regional headquarters based in Hong Kong, an 18-year low, and the number of Japanese-funded companies in Hong Kong also fell to 210. The very tight epidemic prevention measures and border control are the other main reasons for this unfavourable trend.

Singapore seems to be the natural replacement destination if foreign businesses and talents decide to leave Hong Kong. Like Hong Kong, Singapore has the perfect financial system and an even more accessible English communication business environment. More importantly, since September last year, Singapore has lifted all entry quarantine measures. In the first quarter of 2022, the number of people arriving in Singapore from Hong Kong almost doubled.

Currently, Hong Kong is still the third largest international financial centre in the world after New York and London. However, Singapore’s financial industry has been growing rapidly over the past few years. Citigroup planned to relocate some senior employees from Hong Kong to Singapore and other markets. Two other prominent US banks, Bank of America and Wells Fargo are reportedly considering relocating their staff or operations to Singapore.

What’s so good about Singapore?

First, high net worth individuals (HNWI) always look for safe havens for their assets in this increasingly uncertain world. Singapore is a low-tax financial centre, a garden city, and an immigrant country that helps many fulfill their asset security needs.

Many rich flocks to Singapore to set up family offices. According to data from the Monetary Authority of Singapore, as of the end of 2021, there are 400 family offices in Singapore, including Google co-founder Sergey Brin and hedge fund millionaire Ray Dalio.

The rise of Singapore as a FinTech and innovative technology centre also enables it to be a better location for HNWI to invest. Singapore has attracted many start-up companies of cryptocurrencies and Web3 with better blockchain adoption, more crypto-friendly regulations and consumer protection law. This provides many investment opportunities for family offices and venture capitalists.

Young HNWIs and the middle class in Asia born in the 80s and 90s are more sensitive to the Internet and have broader investment knowledge. They are more inclined to invest in technology industries and companies they are familiar with. In addition, their investments are also more aggressive and bold, with a relatively higher allocation to stocks and hedge funds. In this aspect of the investment climate, Hong Kong lags behind Singapore.

Hong Kong Still Has its Strength

Although Singapore is rising rapidly, it still can lag behind Hong Kong on some indicators defining a financial centre.

In the stock market, Singapore’s average daily turnover this year was just S$1.2 billion (US$890 million), compared with HK$128.6 billion (US$16.5 billion) in Hong Kong. 2021 has been a record year for initial public offerings (IPOs) in Asia, with companies raising $2 billion in IPOs in Singapore, compared with $12.2 billion in Hong Kong.



▲The trading volume of the Hong Kong stock exchange is still significantly larger than that of Singapore. Source: Bloomberg
▲The trading volume of the Hong Kong stock exchange is still significantly larger than that of Singapore. Source: Bloomberg


Singaporean officials are trying to persuade Sea and Grab, which are listed on the US Nasdaq exchange, to return to the country for a secondary listing. But the limited appeal and low trading volume of the Singapore-based exchange appear to have failed to impress the companies, dampening any desire for a secondary listing.

In addition, with the increase in work visa applications and investment immigrants worldwide, Singapore has repeatedly raised relevant thresholds to protect local workers’ employment. As for family offices that allow direct application for permanent resident status, the asset size threshold has been raised to S$200 million Singapore dollars. This places barriers for overseas businesses to move their Asian headquarters entirely and makes HNWIs live and invest in this country.

Despite Hong Kong’s existing advantage, Vistra’s report in 2020 found that Singapore has outranked Hong Kong as Asia’s preferred financial hub for the first time, signalling a shift in the balance of power between the two competing financial and business centres.