The steady stream of wealth that is being moved out of Hong Kong to Singapore is due to China’s aggressive posturing on the former British isle.
According to sources familiar with the matter at hands, many foreign wealth managers are scrapping their plans to open offices in Hong Kong and are instead moving to Singapore following the latter’s attempt to pass a new extradition bill with China.
Case in point: a mid-sized European private wealth advisory firm has abandoned its plan to set up its Asia arm in Hong Kong and aims to now launch it in Singapore, said its London-based CEO.
“We have been watching the situation in Hong Kong for the last few weeks and what we are seeing there doesn’t give us much confidence,” said the CEO on the condition of anonymity given the sensitivity of the matter.
“For me, the most important thing is stability for clients because you don’t want to go and invest $1 million-$2 million to set up operations and then one day you need to shut it down because your clients don’t feel safe to operate in that market.”
Already many Hong Kong-based tycoons have begun relocating their personal wealth offshore as concerns deepen over a government plan to allow extraditions of suspects to face trial in China.
The extradition bill would cover Hong Kong residents, as well as foreigners and Chinese nationals living or traveling through the city. While the extradition bill in Hong Kong has been suspended following strong protests, citizens are demanding that it be scrapped midst broader concern that it may threaten the rule of law that underpins Hong Kong’s global financial status.
The wealthy see the extradition bill as a means through which China could seize their assets.
The uncertainty over the bill is clouding Hong Kong’s outlook as a wealth management hub, which is one of its main pillars of growth.
Thanks to China’s aggression on Hong Kong, the former British colony is fast losing its most favorite destination among wealth managers, to Singapore.
In a survey published by Asian Private Banker, a trade publication, 58% of respondents ranked Singapore as their most preferred offshore wealth management hub, followed by Hong Kong and Switzerland, respectively.
One of the main reasons, they respondents preferred Singapore as opposed to Hong Kong is because it is “less connected to Mainland China from a regulatory, political, and financial perspective”.
According to Rahul Sen, a London-based global leader for private banking at headhunter Boyden, said three of his multi-office wealth advisory clients decided in the last few weeks to hire teams of bankers in Singapore after initially considering Hong Kong.
“New teams that are being set up, they are asking why should they align with Hong Kong when the future of Hong Kong itself as an independent wealth hub is uncertain,” said Sen.
The relocation of wealth out of Hong Kong to Singapore is just a stream and not yet a torrent.
On Thursday, the head of Singapore’s central bank disclosed, there were no signs of “any significant shift of business or funds” from Hong Kong to Singapore.
However, Singapore’s property brokers, say they are seeing increased inquiries and visits from Hong Kong-based groups including real estate fund managers and family offices, or private investment vehicles of the rich.
According to Ian Loh, head of investments and capital markets at Knight Frank Singapore, investors are looking at a range of properties – including offices and hotels – starting at around $147.74 million (S$200 million) and going to over S$500 million.
“Real estate in Singapore is an attractive asset class for rich individuals due to its affordability and growth outlook”, said Loh.
Singapore prime office monthly rents have surged by 24% on the year in Q1 2019 to hit $81.2 per square meter, according to Knight Frank. Rents in central Hong Kong rose 3.2% to $221.5 per square meter over the same period.
“The events of recent weeks are likely to add more momentum to a trend that has emerged over the last 18 months where Hong Kong-based private investors and family offices have been looking actively at Singapore property assets,” said Chris Marriott, CEO of Savills in Southeast Asia.
“Singapore could be one of the beneficiaries as Hong Kong investors and high net worth individuals look to shift their funds out of Hong Kong,” said Jenny Ling, director of office services at Colliers International. “(But) the likelihood of a knee-jerk reaction among companies to immediately vacate Hong Kong en masse as a result of the unrest is probably quite low.”