Switzerland and Singapore are two of the financial markets hoping to cash in on concern about Hong Kong’s status as a semi-autonomous region of China. The potential pickings are rich.
The possibility that Hong Kong residents and Hong Kong, Chinese or any other nationals either living or traveling through the city may be summarily extradited to China to face prosecution, raises many fears. One of them is over the sustainability of Hong Kong’s $1 trillion wealth management industry.
The fears of Hong Kong may turn into a welcome bonanza for rival markets. The two traditional private banking hubs of Singapore and Switzerland are frontline candidates to take over what Hong Kong stand to lose.
Hong Kong’s loss would be Singapore’s gain, «Reuters» estimated in a recent report. «Not entirely,» said a managing director at a Swiss private bank. He believes clients will rather move assets out of Asia. «Serious money will go to Switzerland.»
Tycoon Speak
The law, which has been put on hold for the time being, has rattled a very specific population in Hong Kong. The city in 2018 had the second-highest billionaire population after New York. The 93 billionaires and 200,000 millionaires that make up the fabric of Hong Kong’s economy have had many sleepless nights over the past week.
«We have lived in fear of this ever since the Umbrella movement,» says one third-generation Hong Kong tycoon whose family are large landowners on Hong Kong island, referring to the pro-democracy protests of 2014. «I am one of three [siblings] and we each have foreign passports as well as homes abroad.» She is worried that neither will be an effective safeguard against the breadth of the proposed legislation.
Immovable Assets
«It’s no longer a question of whether we have assets offshore,» she said in an interview. «It is now about what we can do about our assets onshore.» For her family, the bulk of these assets continue to be immovable – tied up in prime commercial real estate.
«International private banks have been lending offshore against Hong Kong domestic assets for the last few years,» the banker with the Swiss private bank added. Assets in Hong Kong can be included in estimating the relationship size of a client which then becomes a factor in how much credit the client can avail of, often offshore.
Beginning of the End
Whether assets move to Singapore or Switzerland may be irrelevant to the estimated 3,800 investment advisers, product specialists and client-facing professionals in Hong Kong, whose primary concern is that they will certainly move out of Hong Kong.
«It feels like the beginning of the end of Hong Kong as a private banking hub,» said a relationship manager with a European private bank who believes «headcount will be transferred out or cut» as assets move. «I have seen more colleagues move to Singapore in the last year than in the year before and the trend is unlikely to reverse now,» he added.
