Singapore could elbow Hong Kong aside in the battle to be the main wealth management hub in the Asia-Pacific region if the kind of political conflict afflicting the east Asia city continues, Natixis Global Asset Management has warned.

Singapore could elbow Hong Kong aside in the battle to be the main wealth management hub in the Asia-Pacific region if the kind of political conflict afflicting the east Asia city continues, Natixis Global Asset Management has warned.

As pro-democracy protests in Hong Kong continue – demonstrators do not want Mainland China to vet candidates for key government posts – the disruptions have seen bank branches closed and raised fears about whether the former British colony can sustain its edge. A few weeks ago, the banking industry in Hong Kong warned that demonstrations hurt Hong Kong’s reputation.

In a note, Natixis, quoted Michael McDonough, emerging markets analyst,
Loomis, Sayles & Company, as saying: “Singapore’s status as a rich country, reputation for livability, desirability for social services, and proximity to the more burgeoning ASEAN countries (Indonesia, India and Malaysia) make it extremely attractive. These aspects make Singapore a formidable competitor with Hong Kong in the intermediate term for all business engagements.”

The note said that Hong Kong and Singapore have market capitalisations to gross domestic products of 422 per cent and 144 per cent, vastly ahead of any two other geographies in the world, including the US and China.

“They are clearly both vibrant business centres, responsible for and beneficiaries of Asia's explosive and superior growth. The Singapore dollar has benefited from this recent turbulence in Hong Kong. Investors and companies looking to gain a toehold in Asia will appreciate that the Singapore government has been comparatively accommodating to international investors with progressive schemes to entice investment. There is clearly a rule of law in Singapore, whereas it is harder for Hong Kong investors to enforce claims on the mainland,” the note continued.

Asking the rhetorical question of whether offshore renminbi trading/equity trading operations in Hong Kong will be affected by the protests, it said:  “The Asian investment landscape is skewed toward the public equity markets, and that has favored Hong Kong. Singapore has tended to be more a fixed-income and macro-trading hub. As Asia's corporate debt and currency trading markets deepen, Singapore should gain share.”

“We do not think that the current situation in Hong Kong will slow China’s reform progress, in which Hong Kong as a major international financial hub plays a crucial part,” François Théret, chief investment officer, Absolute Asia Asset Management, was quoted as saying in the same Natixis note.