Recent turmoil and tumult in Hong Kong has spooked investors and dampened business sentiment, prompting capital flight that appears initially to have benefitted rival business and finance hub Singapore.
The Southeast Asian city-state, likewise known for its modern banking and financial services, is widely seen as an attractive alternative for investors seeking stability and impartial rule of law in the region.
The mammoth protests against a proposed extradition bill that have gripped Hong Kong since early June would be unthinkable in Singapore, which strictly enforces laws that curb public protests and political expression.
The weeks-long demonstrations took an extraordinary turn on July 1 when protesters besieged and ransacked Hong Kong’s legislative building on the anniversary of the city’s return to Chinese rule in 1997.
Though the chaotic scenes have made global headlines and raised new questions about the city’s future as Asia’s premier financial center, analysts and experts say the protests are not necessarily the main factor driving the capital outflows.
Banking secrecy laws make it difficult to estimate the true extent of private wealth outflows. While there are no provisional statistics or research on how much capital has fled Hong Kong since the extradition controversy erupted, various indicators suggest business and capital flows diversifying away from the city.
“We’re left with a real crisis of confidence,” Richard Harris, chief executive of Port Shelter Investment, told Asia Times. “We’ve almost moved past the whole issue of the extradition bill into one where people now don’t really have confidence in the government to protect them.”
While the controversial rendition bill has been suspended in response to the protests, its proposal and uncertain status has fueled anxiety among some business elites about Beijing gaining wider authority to freeze or confiscate assets based in Hong Kong.
The botched handling of the contentious bill, moreover, made a lame duck of the semi-autonomous region’s government and stirred new concerns about the erosion of rule of law.
“The issue is less the protests and more the broader question about protection of property from arbitrary seizure or threats to personal safety,” said Ja Ian Chong, an associate professor at the National University of Singapore (NUS).
“The protests endanger none of that; the Hong Kong government’s intransigence about ordinances that undermine the rule of law and the absence of sufficient judicial independence in China do.”
Clemence Poon, a senior lecturer at Hong Kong Baptist University, believes wealthy individuals in Hong Kong “will run for the door” irrespective of whether protests escalate in the days and weeks ahead.
“I think people, or their money, are leaving not because they fear the protests but [rather] the Chinese and Hong Kong government,” he said.
Reports that foreign wealth managers have scrapped plans to open offices in Hong Kong in favor of Singapore have underscored those perceptions.
Amid the anti-extradition bill fracas, property brokers in Singapore have reported increased inquiries and visits from Hong Kong-based fund managers, private investors and family offices that serve high-net-worth investors who are said to be considering multi-million dollar property investments in the city-state.
Hong Kong’s wealthy elite are also snapping up US dollar-dominated insurance products in Singapore amid rising political risks at home. Insurance technology start-up Singapore Life, for instance, recently reported a 20-30% increase in demand from Hongkongers seeking tailored insurance contracts with legacy planning options.
“I’m hearing a lot of anecdotal evidence of high-net-worth investors saying ‘Hold on, maybe we ought to be moving our money to Singapore.’ It’s still early days.” Harris said.
“It is obviously a very stable government. The banks are clearly high quality and highly regulated, so it stands out on that basis as being a jurisdiction very much like Hong Kong.”
Singapore officials have so far declined to confirm whether those anecdotal reports point to a rising trend of offshoring assets in the city-state. Ravi Menon, managing director of Singapore’s central bank, said late last month that there have been “no signs of [a] significant shift in business or funds” to Singapore from Hong Kong.
While that may be the case, analysts agree that Singapore is perfectly positioned to benefit from capital flight driven by Hong Kong’s increasingly cloudy political and regulatory outlook.
“Singapore stands out given that it is a low tax jurisdiction. Some call it a tax haven, where capital gains are barely taxed at all, residential property excepted. There is also banking secrecy,” Chong of NUS told Asia Times.
“Commercial law in Singapore is likewise conducive to business and investors, with courts having a reputation for robustness in this area and light regulation overall. These are likely to be attractive to high-net-worth individuals who wish to safeguard their money.”
Harris believes that although Hong Kong’s governance has recently taken a reputational hit, sentiment will bounce back. “We’ve had a hiccup. I think its reversible. Confidence is very easy to lose but very hard to gain and basically the government has got to work from ground zero to build that up,” he said.
“Hong Kong’s economic, commercial and financial position is probably unlikely to change for another decade in a fundamental way. There’s just too much at stake for the Chinese to mess around with Hong Kong’s commercial freedoms. Chinese money likes Hong Kong because it’s not China and yet it is China,” Harris told Asia Times.
“If Hong Kong became more stable, Hong Kong people will move their money back. That doesn’t mean to say they won’t also think Singapore is a good destination.”
Singapore and Hong Kong share British colonial legacies and compete as financial and commercial centers, with both serving as hubs for multinational corporations. Both also have majority ethnic Chinese populations.
But the two cities have vastly different civic cultures, attitudes toward freedom of speech and assembly, and beliefs in the utility of civil disobedience for achieving political ends.
“We don’t have a confrontational culture towards authority here. Singaporeans are wary of any chaos that may affect their asset value,” said Maa Zhi Hong, a Singaporean political analyst who attributed local attitudes to “a decades-long social compact where civil liberties are curbed and economic progress is delivered.”
Singapore’s political leaders and opinion-makers have long advanced the notion that protests, demonstrations and strikes bring violence and lawlessness that can threaten social harmony and unwind progress, a perspective that both critics and proponents agree has been largely internalized by the island nation’s citizenry.
Establishment figures such as Bilahari Kausikan, an outspoken former Singaporean diplomat, condemned the anti-extradition protests on his Facebook page, writing on June 17 that protesters in Hong Kong had “lost all sense of reality” a day after a massive peaceful march that drew as many as two million people. “At some point [Chinese President Xi Jinping] must act if this continues,” he added.
Leslie Fong, a former editor of Singapore’s English-language broadsheet The Straits Times, was no less critical in an opinion piece, citing Hong Kong’s unrest as validation of laws in Singapore that mandate detention without trial when public security is threatened.
Others, however, are more sympathetic and see Hong Kong’s protests as a potential source of inspiration.
“Singaporeans have the same capability to do what the Hong Kong people have done,” believes Roy Ngerng, a Singaporean activist and former opposition politician now living in self-exile in Taiwan.
In 2014, Ngerng was sued by Singaporean Prime Minister Lee Hsien Loong for defamation over a blog post that alleged misappropriation of funds from the state’s mandatory social security savings scheme.
He recently caused a stir among Singaporeans on social media when he was pictured holding a banner that read “Don’t let Hong Kong be like Singapore where people live in fear” at a rally held in Taipei.
Though he agrees that Singaporeans largely accept the idea that “protests are not the way to deal with things,” Ngerng maintains that “fear convinces them of this logic.”
“Singaporeans do not recognize their power and their strength, they do not realize that if they show the same unity as the Hong Kong people, they can change things.”