The power struggle between the rival financial centers Singapore and Hong Kong is building. This will complicate the strategies of the Asian-based Swiss banks.
«This isn’t exactly adult behavior,» the Hong Kong stock exchange recently complained about the rival in Singapore. The Singapore staff have apparently been demeaning their competitors in Hong Kong during a recent marketing tour.
This sparring is symptomatic for the rivalry between the ambitious Asian financial centers, with a deep antagonism hidden beneath the largely friendly surface.
Locating Heads a Political Hot Potato
Swiss banks in the region need to develop a keen sense of how this rivalry plays out. Choosing executive staff locations can prove a political hot potato, as the recent experience of Bank Julius Baer showed. Singapore was given the nod then and both big Swiss banks have a stronger presence in Singapore.
At least until now, though the power struggle between the two Asian centers is growing. This makes the Swiss bank strategies in the region more complicated. Hong Kong, the junior of the two hubs, is quickly gaining ground on its more senior rival. This is clearly shown in a new study of the rivalry by Deloitte consultants.
Assets More Than Doubled
Managed assets of banks located in Hong Hong increased by 122 percent, or more than doubled, between 2010 and 2017, the strongest growth of all the centers examined in the study. Private banking business in Singapore rose by just 12 percent during this period. With $790 billion in managed assets, the former crown colony is well ahead of the $470 billion managed in the city-state of Singapore (see graphic above).
«Hong Kong is expanding much faster than Singapore,» according to the Deloitte study.The flood of money into Hong Kong can largely be attributed to inflows from mainland China, being the preferred destination for foreign investment and due to the loopholes available to investors. Deloitte data shows the percentage of assets invested in Hong Kong by wealthy mainland Chinese has risen to 56 percent by 2016, from 19 percent in 2011.
Singapore Has Swiss-Type Problems
Singapore, which for years was seen as Asia’s most respected financial center, is being pushed out of the limelight. Like the Swiss financial center, it is having to rely on greater efficiencies and thus higher margins. In addition the liberal and stable economic environment also attracts investments from around the world. But, as in Switzerland, all these advantages mean little when there is no growth.
Still, Hong Kong is increasingly being faced with similar problems. With sophistication come higher fees. Deloitte says the key issue will be how much room for maneuver the Hong Kong financial center will be allowed by the mainland Chinese government.
Mainland China has opened its financial market to global markets further in recent months.
