The rivalry between Hong Kong and Singapore as financial centres is intensifying, due to Hong Kong's well-publicised problems. In recent times, family office investors, in particular, are finding greater comfort in running their affairs from Singapore and some are opting to make the shift, asset owners and advisers told AsianInvestor.
"Anecdotally, and with some examples I know of, we see mainland Chinese single-family offices moving out of Hong Kong. It's been going on for a while," said Steve Diggle, founder of Singapore-based multi-family office Taurus Investment Management.
In Hong Kong, Patricia Woo, family trust and tax expert at Squire Patton Boggs said, "Families are more open to explore Singapore, as Hong Kong is seen as comparatively unstable. We are creating more 13X structures (under the Singapore Income Tax Act) for our clients in Singapore."
Hong Kong and Singapore will continue to be the obvious choices for family office establishment compared to the rest in Asia in terms of the size and sophistication of the market, she added.
"Frankly, those who want to set up family offices in Asia are left with very little choice."
Everyone seems to agree that the key change in the dynamic between the two centres is that political unrest in Hong Kong has raised big questions about the city's long term economic security, and China's ongoing interference in the market.
"You know that old saying "the mountains are high, and the emperor is far away"? That worked to Hong Kong's advantage for some time, attracting mainland private money looking to internationalise," said Diggle.
"But the mountains were not that high, and the emperor is now a little too close."
Singapore is increasingly attractive based on its tax-efficient structures for family offices and a reputable trust company framework, according to Gary Tiernan, managing partner at Singapore MFO Golden Equator, adding that his firm had seen an increase in the number of approaches from Chinese families.
THE FAMILY PERSPECTIVE
Khai Foo is an example of a family office operator who has made the switch from Hong Kong to Singapore. He is the third generation of a family with roots in tin mining and plantations in Malaysia. The family also has interests in education, teaching pre-university students in various vocational courses.
Foo said he has seen a lot of high net worth Chinese moving into Singapore and either setting up their own family offices or bringing in their money to join a multi-family operation.
"In fact the MFOs (multi-family offices) that I speak to are running funds for two big Chinese technology company owners, who have floated their company on the SGX (Singapore Exchange)."
“You would have thought that five or 10 years ago they would have moved to Hong Kong, naturally. But now they come to Singapore. It’s a bit away from the mainland government and maybe that’s a new trend."
Foo’s family still runs a property portfolio in Hong Kong. He takes a pessimistic view of Hong Kong's current woes.
"The family has been talking about whether to sell up now. If we foresee that the property market is heading south, then now may be a good time. My personal view is it's heading south for sure."
ATTRACTIVE FOR CHINESE
Singapore is an obvious next stop after Hong Kong for mainland Chinese money, said Diggle: "Culturally Chinese, low tax, PRC friendly (but not too much) and with excellent banking secrecy laws."
But it would be very difficult to get a Chinese family office to talk about such a move, he said.
"They seem extremely keen on privacy, in my experience. I have heard from a couple of people of their concerns that a steady 'brain drain' is going to make Hong Kong a tougher place to find talent in the future, especially senior western or westernised talent. For now, it's just a good idea to have a base other than Hong Kong."
Noor Quek, a Singapore-based family wealth adviser, told AsianInvestor she felt this shift of sentiment towards Singapore was part of a longer-term trend.
"Hong Kong and Singapore have both built a commendable base of specialism in this area. For some family offices, choosing to favour Singapore is not a knee-jerk reaction to the recent troubles in Hong Kong. They knew, at some point, the trend would be heading that way, but they also see the business potential in Hong Kong. As such, Hong Kong is still a vibrant financial centre."
Woo added, "We still have faith in Hong Kong, as the capital market is strong and the pool of talent remains an attractive factor. In the long run, I anticipate increased mobility between the two."