Wealth managers head to Singapore amid Hong Kong concerns

Singapore is a preferred option for investors leaving Hong Kong. (Reuters)
Updated 28 June 2019
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Wealth managers head to Singapore amid Hong Kong concerns

  • Wealth managers looking to Singapore for new openings

HONG KONG: Some foreign wealth managers are scrapping plans to open offices in Hong Kong in favor of Singapore, as the rich begin to move funds from the Chinese territory where a new extradition bill has stoked public unrest, people familiar with the matter said.

A mid-sized European private wealth advisory firm has abandoned a plan to set up its Asia arm in Hong Kong and will instead aim to launch it in Singapore, its London-based CEO said.

“We have been watching the situation in Hong Kong for the last few weeks and what we are seeing there doesn’t give us much confidence,” he said on condition of anonymity.

“For me, the most important thing is stability for clients because you don’t want to invest
$1 million to $2 million to set up operations and then one day you need to shut it down because your clients don’t feel safe to operate in that market.”

Some Hong Kong tycoons have begun moving their personal wealth offshore as concerns deepen over a government plan to allow extraditions of suspects to face trial in China for the first time.

FASTFACTS

•Move comes as some HK tycoons start moving wealth offshore. •Singapore property brokers are seeing increased inquiries. •Real estate attractive investment asset class for wealthy Asians

The bill, which would cover Hong Kong residents and foreign and Chinese nationals living or traveling through the city, has been suspended. But protesters are now demanding it be scrapped amid broad concern it may threaten the rule of law that underpins Hong Kong’s global financial status.

For the wealthy, a key worry is that Beijing may eventually be able to seize their assets, leading them to weigh moving their assets offshore. Wealth managers mostly go where their clients prefer to park their riches.

The uncertainty over the bill clouds the outlook for Hong Kong as a wealth management hub, one of the main pillars of growth in the former British colony, which has been losing ground to Singapore in recent years.

In a survey published by trade publication Asian Private Banker last year, 58 percent of the respondents ranked Singapore as the most preferred offshore wealth management hub, followed by Hong Kong and Switzerland, respectively.

The survey said Singapore had become particularly attractive because, compared with Hong Kong, it was “less connected to mainland China from a regulatory, political, and financial perspective.”

Rahul Sen, a London-based global leader for private banking at headhunter Boyden, said three of his multi-office wealth advisory clients decided in the past few weeks to hire teams of bankers in Singapore after initially considering Hong Kong.

“New teams that are being set up, they are asking why should they align with Hong Kong when the future of Hong Kong itself as an independent wealth hub is uncertain,” Sen said.

The head of Singapore’s central bank said on Thursday that there were no signs of “any significant shift of business or funds” from Hong Kong to Singapore.

Singapore property brokers, though, said they are seeing increased inquiries and visits from Hong Kong-based groups, including real estate fund managers and family offices, or private investment vehicles of the rich.

Ian Loh, head of investments and capital markets at Knight Frank Singapore, said the investors are looking at a range of properties, including offices and hotels, starting at about S$200 million ($148 million) and going up to S$500 million.

Real estate in Singapore is an attractive asset class for rich individuals due to its affordability and growth outlook.

Singapore prime office monthly rents climbed 24 percent on the year in Q1 2019 to hit $81.2 per square meter, according to research by Knight Frank. Rents in central Hong Kong rose
3.2 percent to $221 per square meter over the same period.

“The events of recent weeks are likely to add more momentum to a trend that has emerged over the last 18 months where Hong Kong-based private investors and family offices have been looking actively at Singapore property assets,” said Chris Marriott, CEO of Savills in Southeast Asia.

Some analysts said it remained to be seen if bigger financial institutions would move assets out of Hong Kong or bypass it.

“Singapore could be one of the beneficiaries as Hong Kong investors and high net worth individuals look to shift their funds out of Hong Kong,” said Jenny Ling, director of office services at Colliers International.


Debut of China’s Nasdaq-style board adds $44bn in market cap

Updated 22 July 2019
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Debut of China’s Nasdaq-style board adds $44bn in market cap

  • Activity draws attention away from main board

BEIJING: Trading on China’s new Nasdaq-style board for homegrown tech firms hit fever pitch on Monday, with shares up as much as 520 percent in a wild debut that more than doubled the exchange’s combined market capitalization and beat veteran investors’ expectations.

Sixteen of the first batch of 25 companies — ranging from chip-makers to health care firms — increased their already frothy initial public offering (IPO) prices by 136 percent on the STAR Market, operated by the Shanghai Stock Exchange.

The raucous first day of trade tripped the exchange’s circuit breakers that are designed to calm frenzied activity. The weakest performer leapt 84.22 percent. In total, the day saw the creation of around 305 billion yuan ($44.3 billion) in new market capitalization on top of an initial market cap of around 225 billion yuan, according to Reuters’ calculations.

“The price gains are crazier than we expected,” said Stephen Huang, vice president of Shanghai See Truth Investment Management. “These are good companies, but valuations are too high. Buying them now makes no sense.”

Modelled after Nasdaq, and complete with a US-style IPO system, STAR may be China’s boldest attempt at capital market reforms yet. It is also seen driven by Beijing’s ambition to become technologically self-reliant as a prolonged trade war with Washington catches Chinese tech firms in the crossfire.

Trading in Anji Microelectronics Technology (Shanghai) Co. Ltd., a semiconductor firm, was briefly halted twice as the company’s shares hit two circuit breakers — first after rising 30 percent, then after climbing 60 percent from the market open.

HIGHLIGHTS

• 16 of 25 STAR Market firms more than double from IPO price.

• Weakest performer gains 84 percent, average gain of 140 percent.

• STAR may be China’s boldest attempt at capital market reforms yet.

The mechanisms did little to keep Anji shares in check as they soared as much as 520 percent from their IPO price in the morning session. Anji shares ended the day up 400.2 percent from their IPO price, the day’s biggest gain, giving the company a valuation of nearly 242 times 2018 earnings.

Suzhou Harmontronics Automation Technology Co. Ltd., in contrast, triggered its circuit breaker in the opposite direction, falling 30 percent from the market open in early trade before rebounding. But by the market close, the company’s shares were still 94.61 percent higher than their IPO price.

Wild share price swings, partly the result of loose trading rules, had been widely expected. IPOs had been oversubscribed by an average of about 1,700 times among retail investors.

The STAR Market sets no limits on share prices during the first five days of a company’s trading. That compares with a cap of 44 percent on debut on other boards in China.

In subsequent trading sessions, stocks on the new tech board will be allowed to rise or fall a maximum 20 percent in a day, double the 10 percent daily limit on other boards.

Regulators last week cautioned individual investors against “blindly” buying STAR Market stocks, but said big fluctuations were normal.

Looser trading rules were aimed at “giving market players adequate freedom in the game, accelerating the formation of equilibrium prices, and boosting price-setting efficiency,” the Shanghai Stock Exchange (SSE) said in a statement on Friday.

The SSE added that it was normal to see big swings in newly listed tech shares, as such companies typically have uncertain prospects, and are difficult to evaluate.