Business travellers have been visiting Hong Kong in recent weeks, attending big finance conferences and mulling whether to wade back into China. Chinese and Hong Kong stocks are up by some US$2 trillion ($2.71 trillion) in market value since the January lows.
Exchanging investment ideas aside, visitors are keen to offer their views on the future of Hong Kong, whose reputation has been dented since the government’s crackdown on the pro-democracy movement in 2019. Views are diverse. Last week, Stephen Roach, Morgan Stanley’s former Asia chair, defended an article he had written that claimed “Hong Kong is over.” Perhaps not coincidentally, emerging markets investing guru Mark Mobius posted a blog on the same day saying the opposite, and that it was never a good idea to write off the potential of any city.
It’s a lively debate. But almost invariably, Singapore is mentioned alongside Hong Kong in these discussions, as if the rise of one spells the demise of the other.
In my view, this comparison isn’t fair. Hong Kong and Singapore sit in very different corners of the financial system. One is an established trading hub that helps companies raise capital, while the other is more suited for private wealth management.
China looms large over both financial centres, whose fortunes move like ocean waves as the mainland goes through business cycles. After the global financial crisis, Hong Kong was the big winner. Blue-chip Chinese companies raced to go public on its bourse and issued billion-dollar corporate bonds. For years, earning investment banking fees was effortless.
As the Chinese economy slowed, Singapore started to shine. Rich mainlanders have been immigrating there since 2019. Singapore has a natural edge in private wealth management, in that it’s not part of China. It’s no coincidence that millionaires from developing nations like to park their money in places like Zurich, far away from banks at home and their governments’ scrutiny.
Think of it this way: Hong Kong is where the Chinese can grow their wealth, while Singapore is where they can preserve it. As China’s economy hits a wall, Singapore is naturally the bigger beneficiary, as Hong Kong once was.
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But does that mean Hong Kong is over? The logic is as absurd as questioning if developed economies still need capital markets. Deal flows have slowed, and making money won’t be as easy, but there’s still demand. Mature firms need to raise cash for other purposes, such as optimizing their capital structure. Recently, blue-chip Chinese firms have been issuing convertible bonds in the city to fund stock buybacks. Hard as Singapore has tried, it still doesn’t have a liquid enough stock market that can rival Hong Kong’s.
Meanwhile, private wealth from China also comes with its own challenges. A money-laundering scandal involving more than $3 billion has tarnished Singapore’s image and exposed weaknesses in how its banks screen their clients.
“Singapore washing,” or Chinese companies setting up headquarters in the city-state to sidestep US-China geopolitical tensions, is another problem. How much of that capital influx will stay in the country, and whether the local economy will benefit, remains an open question.
So far, much of that new money seems to treat Singapore as a mere stopover. Investment firms salivating at the chance to manage billions of dollars have been disappointed. Shein, founded in China where most of its suppliers are, is planning to go public in London, and is hoping to take advantage of the publicity there for a valuation of more than US$60 billion. The online fashion group is not listing in Singapore, where it has its corporate headquarters.
Often, hot money is myopic and judgmental. But those who are savvy and committed to Asia know each city has its own bragging rights and structural challenges. So please, stop comparing apples to oranges.
