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Home > Blogs > Ian Fraser > Hong Kong losing out to Singapore in battle of the Asian financial centers

Hong Kong losing out to Singapore in battle of the Asian financial centers

Hong Kong vs. Singapore in battle of the Asian financial centers Ian Fraser

On December 13, fuelled by the rise of non-banking services including IPOs and insurance, Hong Kong usurped the USA and Britain to become the world’s most advanced financial centre. At least, according the annual Financial Development Report published annually by the World Economic Forum, it did. According to an exhaustive report, the former British colony leapfrogged Wall Street and the City of London to become the first Asian country to top the rankings.

However not everyone agrees that Hong Kong deserved its top slot. Experts on Asian finance suggest that its focus on remaining a "gateway" to China has left it in danger of economic irrelevance. According to these sources, the city-state of Singapore, which was ranked only fourth in the WEF's Financial Development Report, is winning the battle to become Asia's financial centre.

In Asia's Tale of Two Cities, a report published on February 9, Celent suggested that Singapore is emerging as the 'go-to' center for financial institutions wanting access fast-growing  Asian markets or simply seeking to relocate to a lower tax, less-regulated regime. The report's authors Alexander Camargo and Medy Agami predicted the US and Europe will see an accelerating exodus of financial institutions, disenchanted by higher taxes and tougher, post-crisis regulatory regimes.

The Boston-based financial research and consulting firm said that East Asian economies such as Singapore can afford to be more welcoming for peripatetic institutions owing to the fact that they entered the 2008 crisis in strong financial health. This meant these Asian economies were able to ride out the post-crisis economic storm without having to make the savage fiscal and financial cutbacks seen in many western economies, and without any significant credit droughts.  The Asian financial crisis of 1997-98 apparently taught them some important lessons.

Predicting that Singapore is likely to emerge as the dominant Asian derivatives trading centre, Camargo and Agami argued that Hong Kong’s close ties with China “may prove a liability.

“Singapore remains a transparent and law abiding society with strong contract laws and a perceived neutrality. As such, Celent predicts that Singapore will increasingly become an attractive alternative for investors and market segments looking to access the Asian markets.”

Alberto Forchielli, managing director of Mandarin Capital Partners and a prolific blogger on Asian economics, last year said that Hong Kong is being milked as a cash cow by the People's Republic of China to the extent it is “gradually lacking personality and identity." Forchielli added that "Any future projection should consider the “lost decade”, when Hong Kong missed the opportunity to build a different future and chose instead an easy link with Mainland China, binding its destiny to Beijing only."

By contrast, Forchielli praised Singapore for having taken a different path since shaking off its colonial status and for its pursuit of a bolder economic vision, which has included the deliberate maintenance of manufacturing at 27% of its economy.

“Hong Kong ceded its peculiarities too soon to link up with Mainland China ... Hong Kong
businessmen found it easy to go make money in real estate or in low-tech industries in Guandong and did not have to scratch their heads to find creative or risky solutions. This comfortable piggy-backing will last up to the moment Beijing and international companies will not need the old “gateway to China”; probably soon."

Arguing that western financial centers had become "corrupted and corroded", the Singapore-based investor Jim Rogers predicted an outcome along similar lines in his viewpoint article Asia: Future Perspectives, published in the first edition of QFINANCE in October 2009.

Further reading on Singapore vs. Hong Kong:

Tags: Alberto Forchielli , Alexander Camargo , Asian crash , asian economics , Celent , China , East Asia , Hong Kong , Hong Kong stock exchange , IPOs , Jim Rogers , Mandarin Capital Partners , Medy Agami , Singapore , south-east asia , Wall Street , World Economic Forum
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