Bangkok For decades, there was little choice for the exclusive meetings of Asia’s financial elite but Hong Kong’s posh five-star hotels. Anyone wanting to gather the continent’s leading private equity investors, venture capitalists, bankers and family office administrators under one roof had the best chance of a full house in China’s special administrative region.
As the gateway to the Chinese market, the former British colony was seen as the unrivaled location for the financial world in the Far East – and was therefore also indispensable for the industry’s glamorous networking events.
But after more than two years of strict corona measures, the organizers feel compelled to dodge. Major industry events change venues. This is not the only sign of a crisis for Hong Kong’s financial industry: employees are leaving the city in droves out of frustration with the Covid policy. Banks and fund companies pull deals. Thousands of dollar millionaires are looking for a new home.
The hitherto leading financial center in Asia is badly hit. The question of whether Hong Kong can maintain its supremacy in Asia’s financial world is more open than it has been in decades. In the competition of alternative locations, Singapore currently has the best chances.
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For example, industry publication AVCJ is holding its prestigious annual Private Equity & Venture Forum in Singapore in November for the first time in decades. The investor conference Superreturn Asia in September will not be held in the Chinese metropolis as usual, but in the Southeast Asian city-state. Hong Kong’s strict entry rules, which currently require seven days of hotel quarantine, make hosting an international event almost impossible.
In some cases, the actors are giving up Hong Kong completely
After Hong Kong’s population had already shrunk in 2020 and 2021, there were around 140,000 more exits than entries this year. In addition to the problems caused by the strict corona rules, Beijing’s growing influence in the city and the increasing lack of political freedom also contribute to the loss of attractiveness.
According to a study by the consulting firm Henley & Partners, 3,000 people who are classified as particularly wealthy are among the emigrants this year. According to the study, 2,800 high net worth individuals are expected to move to Singapore at the same time.
The change can also be seen in the hedge fund industry: According to data from the analysis company Eurekahedge, Singapore-based funds recently managed $56 billion – eight percent more than in 2019. In Hong Kong, the development went in the other direction: with $87 billion, they are there Although domestic hedge funds are still at the top of Asia, their capital has fallen by 14 percent since 2019.
Some fund operators in the city gave up completely: the hedge fund Myriad Asset, which was founded in Hong Kong and managed more than five billion dollars at times, closed its office in the metropolis this year. According to the Bloomberg financial service, insiders stated that the reason for this was that the portfolio managers could hardly travel in the region due to the quarantine rules.
Hong Kong is still a larger and more active market than Singapore. Hu Jianfeng, finance professor at Singapore Management University
Singapore, the small state on the equator, owes its rise to one of the wealthiest countries in the world to its financial industry, which has flourished for half a century. But compared to Hong Kong, the city-state has always remained Asia’s number two in the industry.
“Hong Kong is still a bigger and more active market than Singapore,” comments Hu Jianfeng, finance professor at Singapore Management University.
For example, Singapore’s stock market can’t even remotely compete with Hong Kong’s stock market. “In view of the recent outflow of capital and personnel, however, the distance between the two cities is becoming smaller and smaller,” analyzes Hu.
According to industry representatives, the exodus in Hong Kong threatens to worsen further if the government insists on the tough corona measures: “If the situation is still the same in twelve months as it is today, then some companies will probably have to relocate,” warns Phillip Meyer, Chairman of the Alternative Investment Management Association in Hong Kong.
Prominent companies withdraw from Hong Kong
At the moment, many large financial groups such as Deutsche Bank are still clearly sticking to the location in the metropolis – Hong Kong is still very important for access to the Chinese market. The list of large banks that have nevertheless already begun to reorient themselves is now very long.
>> Read here: Decline of a financial metropolis – How China’s strict regime is weakening Hong Kong
Citigroup moved senior staff from Hong Kong to Singapore earlier this year. Bank of America followed suit in the spring. Société Générale opened a “back-up” branch in Singapore to be able to withdraw bankers from Hong Kong, at least temporarily. Commerzbank announced last year that it would close its Hong Kong location and instead upgrade its Singapore branch. US bank Wells Fargo is also planning to move its Asian headquarters from Hong Kong to the city-state.
Newcomers are also choosing against Hong Kong and for Southeast Asia: “Singapore is becoming more and more attractive compared to places like Hong Kong, which are close to China and are experiencing some geopolitical problems,” said a representative of the Canadian pension fund Aimco, which has its office in Singapore intends to set up its first Asian branch.
The small state on the equator is one of the wealthiest countries in the world.
(Photo: Moment/Getty Images)
Headhunter Christian Brun, CEO of Wellesley Partners, who specializes in the financial industry, is following the trend and also relocated from Hong Kong to Singapore after having to spend a total of almost four months in quarantine hotels the year before. “Hong Kong is still the key regional center for investment banking,” says Brun. “But we see that private equity firms and family offices that invest regionally are increasingly preferring Singapore as a location.”
>> Read here: Decline of a financial metropolis – How China’s strict regime is weakening Hong Kong
Brun doesn’t think Hong Kong will be able to maintain its decades-long leadership. Financial managers working the Chinese market would increasingly move directly to Beijing or Shanghai. And the regional offices responsible for the rest of Asia would find a new home in Singapore.
Hong Kong as the gateway to China is also losing importance because financial groups often prefer to settle directly in mainland China. This too is an indirect consequence of the Covid rules, as travel between Hong Kong and the rest of China was also severely restricted. Those who had to be with Chinese customers had advantages with a branch in Shanghai.
Tokyo has also raised hopes of being able to benefit from the wave of emigration. The Japanese capital wanted to attract hedge funds from Hong Kong. But that didn’t work – apparently because of the complex tax law there.
There is resistance in Singapore
For the city-state, however, the development does not only have positive sides: the influx of expats who previously worked in Hong Kong’s financial industry is met with increasing criticism from the population. One of the fears is that immigration will cause rents, which are already high, to rise further.
The government is also avoiding aggressively promoting itself as a Hong Kong alternative in the financial industry over the concerns. First and foremost, those companies that hire local staff are welcome – the visa requirements for foreigners will be tightened further in September. However, finance professor Hu warns against isolating oneself too much: In view of the many vacancies in Singapore’s financial industry and a tight labor market, the influx of highly paid bankers is actually a good problem, he says.
More: Why the super-rich are flocking to Singapore