"Crazy Rich" Asians Prefer Singapore or Hong Kong?

to become the wealth capital of Asia. Hong Kong has typically being the hotspot for the reach with its proximity to mainland China, but now that picture is changing as pandemic woes, political conflict and of Boulder Beijing makes Singapore a rising star while Hong Kong gets the dimmer switch. What does this mean for Asia's two biggest wealth contenders and the investors they want to attract. I think the picture ten years from now is that both cities will

continue to do well. Let's bring in Sharnie Wong and senior analyst with Bloomberg Intelligence. Charnie, Welcome, Hi, Tom, Hi John, Thanks for having me. Shanni, Hong Kong was Singapore? Which city is the wealth capital of Asia? Right now? At the moment, it's Hong Kong. When we look at household wealth, Hong Kong has about three point five trillion dollars, whereas Singapore only has about one point eight trillions, So it's close to double Singapore. Shanni. Isn't Singapore catching up to

Hong Kong. There are lots of press reports talking about how rich Chinese man lands are piling money into Singapore. Yes, so when we look at the growth rate over the last couple of years, Singapore has definitely been catching up. It's growing at a much faster pace than Hong Kong. And also that the same case for cross border wealth as well. When we looked at the non resident assets that are booked in Hong Kong and Singapore, that also

is growing faster in Singapore versus Hong Kong. But when we take all that into account in terms of the growth rate, I think it could well take over seventeen years before Singapore could even come close to Hong Kong, simply from the smallest starting point. So Hong Kong has a head start. But we have this image Charny of Singapore with this new spring in its step, while Hong Kong has hunched shoulders. Has Hong Kong permanently lost its edge as a wealth hub. I don't think so clearly.

There are a lot of factors that play. The biggest one would be COVID and the virus curbs. And when we break it down, say for the international investors, I guess it does make sense for some of them to be based out of Singapore given the travel curbs here. But when we look at the mainland wealth, clearly Hong Kong has an edge right now. That edge again is affected by the virus curbs because just geographically it's much closer for people to travel. It's just so convenient prior

to COVID. But then now with the restriction, So I guess it does make a lot of sense for Singapore to grow faster. But ultimately, at some stage, which we don't currently know when, but at some stage, the borders will reopen, and at that point I think Hong Kong has a clear edge to win back that market share. Isn't Hong Kong impacted by rising to political risks between the US and China. Isn't this benefiting neutral Singapore? Yeah?

I think it depends on who you're talking about. Like, for example, there are those people that are concerned in Hong Kong and some of them have chosen to move overseas, and we've definitely seen that trend where there is migration, say to Australia, the UK, etcetera. So there is clearly wealth that's moving out of the city. But at the same time, keep in mind that the mainland China that has historically been a huge wealth tap for Hong Kong

and that is currently closed. It's quite hard for people to move their money offshore right now, not just physically right like it's hard for them to physically leave because of the virus curbs, but also moving their money like with capital controls, it is quite tight. Our guests is Sharnie Wong, senior analyst at Bloomberg Intelligence. Sharnie put on your investors camp. Let's extend that thought just a bit.

You're a wealthy investor, you live in mainland China, You've got between five and ten million US dollars that you want to push off shore. Do you go to Singapore or do you go to Hong Kong. Yes, so that is a quite loaded question. But if you think about it, you really need to know who you're talking about. So are you talking about the ultra high net worth. Are you talking about the lower tier of the high net

worth or are you talking about mass affluent. So if you're the ultra higher net worth, say with over thirty million U S dollars already, it's likely you already have assets globally, and then you've got the high net worths, so those with over one million dollars. And historically, and I think this will continue to be the case, is that Hong Kong has always been the starting point for them.

But right now with mainland China, with the economic worries, when we look at the flows in terms of the wealth connect for example, that's all come to a stop pretty much like quite slow. The sales have been pretty poor. So when we look at the mass affluent segment, which are the people with over one hundred thousand U S dollars, Now I think that it's the key really because when you look at the whole population of China, there is this huge rise in the mass affluent segment driven by

the rising wealth in Asia overall. So right now again that tap has pretty much been turned off, but there is clearly a huge demand because when I look at the onshore numbers out of the AMC, which is China's Asset Management Association. The mutual fund numbers in terms of influence that's continued to go up, and if you think about it, that's really amazing because the stock markets down,

the property market is facing so many issues. But at the same time, mutual fund a u M rise which means influence more than compensate the drop in investment performance. So that's only led by money market funds, also bond funds, So that highlights the investor risk aversion right now, and

that money is basically stuck in China. But again, when they start to ease capital controls or when they start to ease COVID curbs, and then these people can then travel to Hong Kong, it's likely that they will buy wealth managment products here. So I think with that Hong Kong has a clear edge over Singapore to target the

mass affluent people in mainland China. A number of high profile billionaires have set up family officers in Singapore, including India's and Barney family of Reliance Industries, Rate Delhi or Bridgewater Capital. So Brain co founder of Google. Why have all these billionaires chosen Singapore? It's mainly tax incentives. So right now, in Singapore it's a lot more straightforward for a lot of the ultra higher net worth to set up family offices and for them to be exempt from

paying income tax. Having said that, Hong Kong it is less straightforward, but the government is doing something about it. So in March they already announced for public consultation this plan to um change the scheme for family offices, which would mean that they don't have to pay profits tax. So I think with that change coming, it would be interesting to see because I think that the dynamics would change,

and also the other changes. Singapore is actually tightening their rules for family offices in April they minimum AUM requirements and also you have to allocate ten percent of your assets domestically and invested in Singapore. So I think it's quite interesting in the contrast because Hong Kong it's loosening up in terms of granting those tax exemptions, but then Singapore it's moving the other way. Singapore and Hong Kong

are both vulnerable to external economic conditions. You've got trade conflict, you've got inflation, rising interest rates. How much of what we're seeing in this dynamic is due to COVID and the new political climate in Hong Kong. And how much is due to global economic weakness do you think? I think both cities are clearly international financial hubs, so they

are both very exposed to what goes on globally. The thing is right now, the global economic picture is already weakening, but Singapore continues to do well because they are gaining a lot of wealth inflows right now, Shanny, look into your analysts crystal ball. What does the picture look like ten years from now? I think the picture ten years from now is that both cities will continue to do well. I think Singapore for the next few years has a

better growth outlook. Definitely wouldn't rite off Hong Kong. You know, Hong Kong ultimately has a backing of Beijing. It has a lot of financial infrastructure that Singapore doesn't yet have. So say, with the stock connect, the bond connect, the wealth connect, there's that potential in the greater area that has yet to be tapped. Shanny, what's at stake for Hong Kong and Singapore companies In terms of the companies

that do benefit. I think DBS and O C b C benefits from from the perspective where they have a huge business in Singapore. Obviously they're quite dominant there, but also they have a big presence in Hong Kong as well. For O C b C, Greater China accounts for slightly less than a quarter of their profit. No matter which city does better, Singapore or Hong Kong, they both will benefit. Shane.

If you take a look at events and shine up of late, you look at what's happened to tech over the past year, you look at the rhetoric around common prosperity. Do you think there's a perception among investors that China has abandoned the pursuit of well for something else, and how is that affecting their perceptions of Hong Kong and Singapore. Yes, so the crackdown on big tech I think has had

an impact and the push for common prosperity. But the way that I interpret that is mainly they just want to close the wealth gap, right, and that wealth gap has worsened over the past decade, so now they're trying to pull things back and it for wealth managers, I think there are still opportunities. So the ultra high net worth they may be impacted, life could be harder for them. But with the mass affluent segment that's those are the people that they want to help in terms of being

able to fund their own retirement for example. So there are clearly a lot of opportunities for fund managers wealth managers to continue to do business in mainland China. And when we look at the what the global banks are doing Credit, Swiss Ubs, Goldman, Sachs, Morgan, Stanley, etcetera. They all have stakes there and they're only just at the beginning of their growth. They've only just recently started to gain control of a lot of these fund management subsidiaries.

So I think the road maybe long and bumpy, but ultimately there is huge potential and none of these firms can afford to miss out on such a big market. Shani. Is the property market a good indication of where the ultra which are putting their money? Yeah, I think um as an allocation to property is one indicator. And when we look at the government rental index numbers for the landed properties in Singapore, that's up over so it is skyrocketing.

In Hong Kong it's actually down about two so it's not too bad, but of course it's softened, but looking at that, I think a lot of the overseas expats right now, and also a lot of the ultra high net worth they have chosen to move to Singapore, at least for now, and I think again the biggest consideration would be how easy is it for them to travel in and out of the city. Hong Kong we are partly open, I would say, but still not fully so.

I think that contrast is very interesting, where Singapore has um gone up very fast in terms of rent and also property prices. Patrick, he is expecting Singapore to continue to do pretty well, and in Hong Kong there is still that uncertainty. We don't know when we will be fully open for business, so right now we are in a slump. But if and when it opens, it could again catch up. Ye. There's been a huge amount of wealth creation from cryptocurrencies and recently also some wealth destruction.

But is Singapore more attractive for crypto investments over the past few years. I think it has been simply because Singapore has that regulatory certainty, especially for retail investors on crypto, whereas Hong Kong they've pretty much stayed silent, right but I think that is now changing at Fintech Week, the Hong Kong government basically said that they want to explore how we can let retail investors access digital assets. So I think that is definitely a step in the right direction.

At once companies that do crypto have that regulatary clarity in Hong Kong, I think it's likely that a lot of them would choose to be based here. Our guest has been Sharnie Wong, senior analyst with Bloomberg Intelligence. Sharnie, thanks for joining us, Thanks Tom, Thanks John, and I'm John Lee. Thank you for listening to the Asia Centric podcast.