It was a drizzle that turned into a storm. When the Hong Kong government announced changes to extradition rules allowing people to be sent to mainland China for trial, it not only triggered a political crisis, but an economic one too.
For Hong Kong investors and democracy advocates alike, the extradition bill reinforced concerns the Beijing-backed government was corroding the legal wall separating the local judicial system from the mainland’s—the One Nation, Two Systems policy put in place when China took back Hong Kong from the UK and Macau from Portugal.
For the ultra-wealthy, however, the key worry was that Beijing would eventually be able to seize their assets. If the bill became law, mainland Chinese courts could request Hong Kong courts freeze and confiscate assets of Hong Kong residents, and Chinese and foreign nationals living or travelling through the city.
Weeks of protests and violence did eventually force the bill’s initial legislative debate to be shelved, but it could still be revived in the future.
Continued chaos in the city has thrown Hong Kong’s suitability as a wealth management hub into doubt, with local media reporting many of the city’s ultra-wealthy residents are considering shifting their assets offshore. So, who is about to become the new beneficiary for the region’s wealthy? According to the latest reports—Singapore and its $2.4 trillion asset management industry.
Historically, Hong Kong and Singapore have competed for position as Asia’s premier financial centre. The riches held by Hong Kong’s tycoons have, until now, made the city the larger private wealth base, with 853 individuals worth more than $100 million—just over double the number in Singapore, according to a 2018 wealth report by Credit Suisse.
But as the weight of Beijing’s might is being increasingly felt in Hong Kong, the balance is starting to tilt in Singapore’s favour. Widespread reports have cited wealth managers receiving large flows of new money in Singapore from Hong Kong, while some foreign wealth managers said they were scrapping plans to open offices in Hong Kong in favour of Singapore.
Property brokers have also reported increased inquiries from Hong Kong-based fund managers, private investors and family offices.
And Hong Kong’s family office space is beginning to feel the heat.
China’s rapidly growing super-rich are choosing Singapore over Hong Kong as their base due to its political stability, language and rapid air connections with China. David Chong, chairman of Labuan, an independent trust company providing advice to family offices and high-net-worth individuals, told The Straits Times he was aware of family offices that manage at least $200 million AUM looking to locate in Singapore rather than Hong Kong.
For now, officials from the Monetary Authority of Singapore have cautioned wealth managers against aggressively marketing their services and capitalising on their rival’s political turmoil, but as Beijing’s grip on Hong Kong tightens and the ultra-wealthy community look to secure its future, it looks like Singapore will be crowned Asia’s new premier financial centre.