Some foreign wealth managers are scrapping plans to open offices in Hong Kong in favour of Singapore, as the rich begin to move funds from the Chinese territory where a new extradition bill has stoked public unrest, people familiar with the matter said.
A mid-sized European private wealth advisory firm has abandoned a plan to set up its Asia arm in Hong Kong and will instead aim to launch it in Singapore, its London-based chief executive told Reuters.
“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 chief executive, on condition of anonymity due to 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.”
Some Hong Kong tycoons have begun moving their personal wealth offshore as concerns deepen over a government plan to allow extraditions of suspects to face trial in China for the first time, Reuters reported earlier this month.
The bill, which would cover Hong Kong residents and foreign and Chinese nationals living or travelling through the city, has been suspended. But protesters are now demanding it be scrapped amid broad concern it may threaten the rule of law that underpins Hong Kong’s global financial status.
For the wealthy, a key worry is that Beijing may eventually be able to seize their assets, leading them to weigh moving their assets offshore. Wealth managers mostly go where their clients prefer to park their riches.
The uncertainty over the bill clouds the outlook for Hong Kong as a wealth management hub, one of the main pillars of growth in the former British colony, which has been losing ground to Singapore in recent years.
In a survey published by trade publication Asian Private Banker last year, 58% of the respondents ranked Singapore as the most preferred offshore wealth management hub, followed by Hong Kong and Switzerland, respectively.
The survey said Singapore had become particularly attractive because, compared to Hong Kong, it was “less connected to Mainland China from a regulatory, political, and financial perspective”.
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,” Sen said.
Property investments
The head of Singapore’s central bank said on Thursday that there were no signs of “any significant shift of business or funds” from Hong Kong to Singapore.
Singapore property brokers, though, said 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.
Ian Loh, head of investments and capital markets at Knight Frank Singapore, said the investors are looking at a range of properties – including offices and hotels - starting at around S$200 million ($147.74 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.
Singapore prime office monthly rents climbed 24% on the year in Q1 2019 to hit $81.2 per square metre, according to research by Knight Frank. Rents in central Hong Kong rose 3.2% to $221.5 per square metre 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.
Some analysts said it remained to be seen if bigger financial institutions would move assets out of Hong Kong or bypass it.
“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.”