Speaker 1: You're listening to Asia Centric from Bloomberg Intelligence, the podcast
Speaker 1: that pulls back the curtain on global business so you
Speaker 1: can invest better across the Pacific rim. I'm Tom M. Corbett,
Speaker 1: editor for Bloomberg Intelligence in Hong Kong, and I'm John Lee,
Speaker 1: marketing analysts with Bloomberg Intelligence. In this episode, we'll look
Speaker 1: at the tug of war between Hong Kong and Singapore
Speaker 1: to become the wealth capital of Asia. Hong Kong has
Speaker 1: typically being the hotspot for the reach with its proximity
Speaker 1: to mainland China, but now that picture is changing as
Speaker 1: pandemic woes, political conflict and of Boulder Beijing makes Singapore
Speaker 1: a rising star while Hong Kong gets the dimmer switch.
Speaker 1: What does this mean for Asia's two biggest wealth contenders
Speaker 1: and the investors they want to attract. I think the
Speaker 1: picture ten years from now is that both cities will
Speaker 1: continue to do well. Let's bring in Sharnie Wong and
Speaker 1: senior analyst with Bloomberg Intelligence. Charnie, Welcome, Hi, Tom, Hi John,
Speaker 1: Thanks for having me. Shanni, Hong Kong was Singapore? Which
Speaker 1: city is the wealth capital of Asia? Right now? At
Speaker 1: the moment, it's Hong Kong. When we look at household wealth,
Speaker 1: Hong Kong has about three point five trillion dollars, whereas
Speaker 1: Singapore only has about one point eight trillions, So it's
Speaker 1: close to double Singapore. Shanni. Isn't Singapore catching up to
Speaker 1: Hong Kong. There are lots of press reports talking about
Speaker 1: how rich Chinese man lands are piling money into Singapore. Yes,
Speaker 1: so when we look at the growth rate over the
Speaker 1: last couple of years, Singapore has definitely been catching up.
Speaker 1: It's growing at a much faster pace than Hong Kong.
Speaker 1: And also that the same case for cross border wealth
Speaker 1: as well. When we looked at the non resident assets
Speaker 1: that are booked in Hong Kong and Singapore, that also
Speaker 1: is growing faster in Singapore versus Hong Kong. But when
Speaker 1: we take all that into account in terms of the
Speaker 1: growth rate, I think it could well take over seventeen
Speaker 1: years before Singapore could even come close to Hong Kong,
Speaker 1: simply from the smallest starting point. So Hong Kong has
Speaker 1: a head start. But we have this image Charny of
Speaker 1: Singapore with this new spring in its step, while Hong
Speaker 1: Kong has hunched shoulders. Has Hong Kong permanently lost its
Speaker 1: edge as a wealth hub. I don't think so clearly.
Speaker 1: There are a lot of factors that play. The biggest
Speaker 1: one would be COVID and the virus curbs. And when
Speaker 1: we break it down, say for the international investors, I
Speaker 1: guess it does make sense for some of them to
Speaker 1: be based out of Singapore given the travel curbs here.
Speaker 1: But when we look at the mainland wealth, clearly Hong
Speaker 1: Kong has an edge right now. That edge again is
Speaker 1: affected by the virus curbs because just geographically it's much
Speaker 1: closer for people to travel. It's just so convenient prior
Speaker 1: to COVID. But then now with the restriction, So I
Speaker 1: guess it does make a lot of sense for Singapore
Speaker 1: to grow faster. But ultimately, at some stage, which we
Speaker 1: don't currently know when, but at some stage, the borders
Speaker 1: will reopen, and at that point I think Hong Kong
Speaker 1: has a clear edge to win back that market share.
Speaker 1: Isn't Hong Kong impacted by rising to political risks between
Speaker 1: the US and China. Isn't this benefiting neutral Singapore? Yeah?
Speaker 1: I think it depends on who you're talking about. Like,
Speaker 1: for example, there are those people that are concerned in
Speaker 1: Hong Kong and some of them have chosen to move overseas,
Speaker 1: and we've definitely seen that trend where there is migration,
Speaker 1: say to Australia, the UK, etcetera. So there is clearly
Speaker 1: wealth that's moving out of the city. But at the
Speaker 1: same time, keep in mind that the mainland China that
Speaker 1: has historically been a huge wealth tap for Hong Kong
Speaker 1: and that is currently closed. It's quite hard for people
Speaker 1: to move their money offshore right now, not just physically
Speaker 1: right like it's hard for them to physically leave because
Speaker 1: of the virus curbs, but also moving their money like
Speaker 1: with capital controls, it is quite tight. Our guests is
Speaker 1: Sharnie Wong, senior analyst at Bloomberg Intelligence. Sharnie put on
Speaker 1: your investors camp. Let's extend that thought just a bit.
Speaker 1: You're a wealthy investor, you live in mainland China, You've
Speaker 1: got between five and ten million US dollars that you
Speaker 1: want to push off shore. Do you go to Singapore
Speaker 1: or do you go to Hong Kong. Yes, so that
Speaker 1: is a quite loaded question. But if you think about it,
Speaker 1: you really need to know who you're talking about. So
Speaker 1: are you talking about the ultra high net worth. Are
Speaker 1: you talking about the lower tier of the high net
Speaker 1: worth or are you talking about mass affluent. So if
Speaker 1: you're the ultra higher net worth, say with over thirty
Speaker 1: million U S dollars already, it's likely you already have
Speaker 1: assets globally, and then you've got the high net worths,
Speaker 1: so those with over one million dollars. And historically, and
Speaker 1: I think this will continue to be the case, is
Speaker 1: that Hong Kong has always been the starting point for them.
Speaker 1: But right now with mainland China, with the economic worries,
Speaker 1: when we look at the flows in terms of the
Speaker 1: wealth connect for example, that's all come to a stop
Speaker 1: pretty much like quite slow. The sales have been pretty poor.
Speaker 1: So when we look at the mass affluent segment, which
Speaker 1: are the people with over one hundred thousand U S dollars,
Speaker 1: Now I think that it's the key really because when
Speaker 1: you look at the whole population of China, there is
Speaker 1: this huge rise in the mass affluent segment driven by
Speaker 1: the rising wealth in Asia overall. So right now again
Speaker 1: that tap has pretty much been turned off, but there
Speaker 1: is clearly a huge demand because when I look at
Speaker 1: the onshore numbers out of the AMC, which is China's
Speaker 1: Asset Management Association. The mutual fund numbers in terms of
Speaker 1: influence that's continued to go up, and if you think
Speaker 1: about it, that's really amazing because the stock markets down,
Speaker 1: the property market is facing so many issues. But at
Speaker 1: the same time, mutual fund a u M rise which
Speaker 1: means influence more than compensate the drop in investment performance.
Speaker 1: So that's only led by money market funds, also bond funds,
Speaker 1: So that highlights the investor risk aversion right now, and
Speaker 1: that money is basically stuck in China. But again, when
Speaker 1: they start to ease capital controls or when they start
Speaker 1: to ease COVID curbs, and then these people can then
Speaker 1: travel to Hong Kong, it's likely that they will buy
Speaker 1: wealth managment products here. So I think with that Hong
Speaker 1: Kong has a clear edge over Singapore to target the
Speaker 1: mass affluent people in mainland China. A number of high
Speaker 1: profile billionaires have set up family officers in Singapore, including
Speaker 1: India's and Barney family of Reliance Industries, Rate Delhi or
Speaker 1: Bridgewater Capital. So Brain co founder of Google. Why have
Speaker 1: all these billionaires chosen Singapore? It's mainly tax incentives. So
Speaker 1: right now, in Singapore it's a lot more straightforward for
Speaker 1: a lot of the ultra higher net worth to set
Speaker 1: up family offices and for them to be exempt from
Speaker 1: paying income tax. Having said that, Hong Kong it is
Speaker 1: less straightforward, but the government is doing something about it.
Speaker 1: So in March they already announced for public consultation this
Speaker 1: plan to um change the scheme for family offices, which
Speaker 1: would mean that they don't have to pay profits tax.
Speaker 1: So I think with that change coming, it would be
Speaker 1: interesting to see because I think that the dynamics would change,
Speaker 1: and also the other changes. Singapore is actually tightening their
Speaker 1: rules for family offices in April they minimum AUM requirements
Speaker 1: and also you have to allocate ten percent of your
Speaker 1: assets domestically and invested in Singapore. So I think it's
Speaker 1: quite interesting in the contrast because Hong Kong it's loosening
Speaker 1: up in terms of granting those tax exemptions, but then
Speaker 1: Singapore it's moving the other way. Singapore and Hong Kong
Speaker 1: are both vulnerable to external economic conditions. You've got trade conflict,
Speaker 1: you've got inflation, rising interest rates. How much of what
Speaker 1: we're seeing in this dynamic is due to COVID and
Speaker 1: the new political climate in Hong Kong. And how much
Speaker 1: is due to global economic weakness do you think? I
Speaker 1: think both cities are clearly international financial hubs, so they
Speaker 1: are both very exposed to what goes on globally. The
Speaker 1: thing is right now, the global economic picture is already weakening,
Speaker 1: but Singapore continues to do well because they are gaining
Speaker 1: a lot of wealth inflows right now, Shanny, look into
Speaker 1: your analysts crystal ball. What does the picture look like
Speaker 1: ten years from now? I think the picture ten years
Speaker 1: from now is that both cities will continue to do well.
Speaker 1: I think Singapore for the next few years has a
Speaker 1: better growth outlook. Definitely wouldn't rite off Hong Kong. You know,
Speaker 1: Hong Kong ultimately has a backing of Beijing. It has
Speaker 1: a lot of financial infrastructure that Singapore doesn't yet have.
Speaker 1: So say, with the stock connect, the bond connect, the
Speaker 1: wealth connect, there's that potential in the greater area that
Speaker 1: has yet to be tapped. Shanny, what's at stake for
Speaker 1: Hong Kong and Singapore companies In terms of the companies
Speaker 1: that do benefit. I think DBS and O C b
Speaker 1: C benefits from from the perspective where they have a
Speaker 1: huge business in Singapore. Obviously they're quite dominant there, but
Speaker 1: also they have a big presence in Hong Kong as well.
Speaker 1: For O C b C, Greater China accounts for slightly
Speaker 1: less than a quarter of their profit. No matter which
Speaker 1: city does better, Singapore or Hong Kong, they both will benefit. Shane.
Speaker 1: If you take a look at events and shine up
Speaker 1: of late, you look at what's happened to tech over
Speaker 1: the past year, you look at the rhetoric around common prosperity.
Speaker 1: Do you think there's a perception among investors that China
Speaker 1: has abandoned the pursuit of well for something else, and
Speaker 1: how is that affecting their perceptions of Hong Kong and Singapore. Yes,
Speaker 1: so the crackdown on big tech I think has had
Speaker 1: an impact and the push for common prosperity. But the
Speaker 1: way that I interpret that is mainly they just want
Speaker 1: to close the wealth gap, right, and that wealth gap
Speaker 1: has worsened over the past decade, so now they're trying
Speaker 1: to pull things back and it for wealth managers, I
Speaker 1: think there are still opportunities. So the ultra high net
Speaker 1: worth they may be impacted, life could be harder for them.
Speaker 1: But with the mass affluent segment that's those are the
Speaker 1: people that they want to help in terms of being
Speaker 1: able to fund their own retirement for example. So there
Speaker 1: are clearly a lot of opportunities for fund managers wealth
Speaker 1: managers to continue to do business in mainland China. And
Speaker 1: when we look at the what the global banks are
Speaker 1: doing Credit, Swiss Ubs, Goldman, Sachs, Morgan, Stanley, etcetera. They
Speaker 1: all have stakes there and they're only just at the
Speaker 1: beginning of their growth. They've only just recently started to
Speaker 1: gain control of a lot of these fund management subsidiaries.
Speaker 1: So I think the road maybe long and bumpy, but
Speaker 1: ultimately there is huge potential and none of these firms
Speaker 1: can afford to miss out on such a big market. Shani.
Speaker 1: Is the property market a good indication of where the
Speaker 1: ultra which are putting their money? Yeah, I think um
Speaker 1: as an allocation to property is one indicator. And when
Speaker 1: we look at the government rental index numbers for the
Speaker 1: landed properties in Singapore, that's up over so it is skyrocketing.
Speaker 1: In Hong Kong it's actually down about two so it's
Speaker 1: not too bad, but of course it's softened, but looking
Speaker 1: at that, I think a lot of the overseas expats
Speaker 1: right now, and also a lot of the ultra high
Speaker 1: net worth they have chosen to move to Singapore, at
Speaker 1: least for now, and I think again the biggest consideration
Speaker 1: would be how easy is it for them to travel
Speaker 1: in and out of the city. Hong Kong we are
Speaker 1: partly open, I would say, but still not fully so.
Speaker 1: I think that contrast is very interesting, where Singapore has
Speaker 1: um gone up very fast in terms of rent and
Speaker 1: also property prices. Patrick, he is expecting Singapore to continue
Speaker 1: to do pretty well, and in Hong Kong there is
Speaker 1: still that uncertainty. We don't know when we will be
Speaker 1: fully open for business, so right now we are in
Speaker 1: a slump. But if and when it opens, it could
Speaker 1: again catch up. Ye. There's been a huge amount of
Speaker 1: wealth creation from cryptocurrencies and recently also some wealth destruction.
Speaker 1: But is Singapore more attractive for crypto investments over the
Speaker 1: past few years. I think it has been simply because
Speaker 1: Singapore has that regulatory certainty, especially for retail investors on crypto,
Speaker 1: whereas Hong Kong they've pretty much stayed silent, right but
Speaker 1: I think that is now changing at Fintech Week, the
Speaker 1: Hong Kong government basically said that they want to explore
Speaker 1: how we can let retail investors access digital assets. So
Speaker 1: I think that is definitely a step in the right direction.
Speaker 1: At once companies that do crypto have that regulatary clarity
Speaker 1: in Hong Kong, I think it's likely that a lot
Speaker 1: of them would choose to be based here. Our guest
Speaker 1: has been Sharnie Wong, senior analyst with Bloomberg Intelligence. Sharnie,
Speaker 1: thanks for joining us, Thanks Tom, Thanks John, and I'm
Speaker 1: John Lee. Thank you for listening to the Asia Centric podcast.