From Asia to Europe, media has reported how protests against extradition legislation in Hong Kong are causing the wealthy to move their money to Singapore. Talk to bankers, though, and the story may well be different, says Richard Hartung.
The media says money is flowing to Singapore
Soon after protests over new extradition legislation started in Hong Kong on 12 June this year, local and global media began reporting that the wealthy had started moving their money to Singapore. The stories have continued unabated.
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In Singapore, for example, Today, an English-language digital news site, reported in mid-June that Hong Kong tycoons had started moving personal wealth offshore, with one of them shifting more than $100 million from a Citibank account in Hong Kong to a Citibank account in Singapore, “It’s started,” an unnamed financial adviser said. “We’re hearing others are doing it, too, but no one is going to go on parade that they are leaving,”
Towards the end of June, Reuters noted that some foreign wealth managers were ending plans to open offices in Hong Kong and choosing Singapore instead, as the rich begin to move funds out of Hong Kong. An unnamed mid-sized European private wealth advisory firm reportedly abandoned plans to set up its Asia arm in Hong Kong, choosing Singapore instead.
And in mid-July, Bloomberg reported that “private bankers are being flooded with inquiries from investors in Hong Kong who are worried about the long-term effects of the political crisis. A new tier of wealthy investors are setting up ways to move their money out of the former British colony more quickly.” Lawrence Lua, deputy head of private banking at DBS Singapore, told Bloomberg that “we’ve received increased amount of client inquiries about the Hong Kong situation in the past weeks.”
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By GlobalDataBankers say it’s not moving yet
Many Singaporean bankers do acknowledge that they received inquiries shortly after the protests started, however, most money is not moving to Singapore yet.
As evidence, the Monetary Authority of Singapore (MAS) managing director Ravi Menon said in late June that despite reports that some people in Hong Kong had begun moving money offshore, data, as well as conversations with financial institutions, indicated that there has been no sign of a significant shift in business or funds.
Even so, MAS cautioned wealth managers at local banks in Singapore against aggressively marketing their services or making other efforts to woo clients by capitalising on Hong Kong’s political turmoil.
Most bankers are reluctant to talk about the trends publicly. The head of wealth management in Hong Kong for a large international private bank did say privately in mid-July that although an unusual number of clients had asked about shifting funds to Singapore, their funds are staying put in Hong Kong.
Similarly, towards the end of July, DBS Bank CEO Piyush Gupta told CNBC that there is no “big movement of money from Hong Kong to Singapore.” Instead, fund flows are only happening at the margin.
“In my experience,” Gupta said, “these big shifts don’t happen unless there’s a massive regime change, which we don’t foresee happening in Hong Kong. The focus on Singapore benefiting at Hong Kong’s expense is perhaps overstated,”
A banker at a leading global private bank in Singapore likewise remarked in early August that they still had not seen money flowing in from Hong Kong, and observed that many wealthy clients already had their money diversified into multiple jurisdictions.
Another private banker at a separate global bank said they also had not seen any significant movement of client funds from Hong Kong to Singapore.
Bankers are staying put
Private banking jobs are not being relocated from Hong Kong and, if anything, recruitment is increasing in the Special Administrative Region.
Although efinancialcareers writer Simon Morlock wrote in July that executive recruiters have noticed a rise in Hong Kong-based private bankers contacting them about Singapore jobs in recent weeks, citing concerns about the extradition bill it, large private banks do not appear to be moving jobs from Hong Kong to Singapore.
Hong Kong private bankers cover mainland Chinese clients, which account for a far higher percentage of global wealth than Hong Kong itself. With these clients still favouring global private banks in Hong Kong, bankers are unlikely to be relocated anytime soon.
Bank of Singapore (BoS) actually increased its commitment to Hong Kong over the last two years with numerous senior hires. BoS branch CEO for Greater China and North Asia Derrick Tan commented last year: “Hong Kong is one of the most important international financial centres in the Asia-Pacific region. The fund flows in the Greater China region continue to increase every year and we want to position ourselves to capture that flow.”
Recent announcements have also seen VP Bank Group, a Liechtenstein-based private bank, sign a memorandum of understanding with Hywin Wealth Management (China) to develop a Hong Kong-based collaboration platform for the affluent in China.
Since the protests were underway, Pictet Asset Management has hired a new CEO and Jefferies a new Asia chairman.
Other factors are at play
Other factors are at playIndividuals who have moved funds to Singapore in recent years may well have based their decision on broader trends that result from longer-term catalysts. Indeed, the shift of funds to Singapore has been occurring for some time.
“Our office has been diversifying outside Hong Kong for years since the Umbrella Movement” protests in 2014, Marc Geary, managing director at Major Domus, a multifamily office, told the Financial Times. “We have seen a trend to offshoring assets in the last few years and the recent protests on extradition legislation are another catalyst underpinning this.”
Another reason for shifting funds abroad is that Hong Kong recently signed tax transparency agreements which require banks to report account holders’ information to Hong Kong officials, which in turn makes the information available to 75 jurisdictions, including China. While Singapore has similar agreements with 61 jurisdictions, it does not include either China or Hong Kong.
Additionally, the Hong Kong Securities and Futures Commission (SFC) released new regulations in July 2019 to classify all investment products as either complex or non-complex. While the distinction may seem minor, observers said it may cause intermediaries who support investors to exit Hong Kong and it may lead to investors seeking products that can generate superior returns to turn to intermediaries outside of Hong Kong.
Both regulatory changes may indeed have concerned investors in Hong Kong as well as investors from China or Taiwan who keep their funds there and led to their shifting funds offshore.
Media reports are more hype than reality
While wealthy individuals in Hong Kong may have greater concerns about living there amidst protests and potential legislation, media reports so far seem to be more hype than reality. It’s clearly worth watching data: The latest shows the total assets under management (AUM) in the asset and wealth management industry in Hong Kong were down 5% in December 2018. If and by how much this momentum continues will be indicative of the effects the protests have had on Hong Kong’s financial services sector.
Peripheral indicators such as regulators’ statements, property purchases, and staff movements will be closely watched as protests continue.
