Singapore’s rebalancing is a delicate act


MUMBAI (Reuters Breakingviews) –

ON THE LOOKOUT

Singapore’s center of gravity is shifting. The pandemic has cemented its reputation as a safe haven for wealthy Asians looking to park their cash. But beyond its role as the “Switzerland of the East”, entrepreneurs, leaders and investors – particularly from China – see the small country as a destination for more active business investment.

The Lion City, home to 5.5 million people at the tip of the Malay Peninsula, has benefited hugely from political uncertainty and pandemic pain elsewhere. Take the $68 billion DBS Group, the top local lender: net new money inflows into its private bank from overseas saw a stunning 170% year-over-year increase in the first half of 2020 , and remain robust. Single-family offices in the city increased fivefold between 2017 and 2019, and stood at around 400 in 2020, according to official estimates. All signs suggest the pace is picking up.

Singapore is also slowly shedding its unwelcome nickname “Singa-snore”, referring to the city’s easy pace. Frustrated Western financial executives fleeing Hong Kong’s Covid-19 policies began moving to the hub, generating flattering headlines. However, Singapore’s growing attractiveness to tech companies is far more significant.

The local stock exchange is still struggling to attract popular IPOs. But that’s less of a sore point now that tech champions like Grab, Sea and GoTo are using the city as a base to exploit Southeast Asia, home to a population more than double that of the United States. Google and Alphabet’s Zoom are stepping up for similar reasons. The International Monetary Fund’s ASEAN-5 group, comprising Indonesia, the Philippines and Vietnam, comprises a $3 trillion economy that is expected to grow nearly 6% in 2022.

Cryptocurrency geeks are also making an appearance. Although regulators are picky about trade license approvals, avoiding big names like Binance, they are tentatively embracing the industry by keeping an eye on the potential of related blockchain technologies. This contrasts sharply with prohibitions elsewhere. The absence of capital gains tax is a sweetener.

But the most striking trend, which has accelerated throughout the pandemic, is the intensification of the mainland Chinese presence even as Singapore leans diplomatically westward. The government abandoned its famous neutrality to sanction Russia and Prime Minister Lee Hsien Loong was welcomed at the White House on Tuesday.

Some ultra-rich Chinese may be seeking a buffer between their wealth, their businesses and Beijing’s constant crackdowns: Singapore allows family office managers with net assets to invest at least 200 million Singapore dollars (147 million dollars) to apply for permanent residence. Yet the trend also coincides with the excitement around the accelerated digitalization of developing Asia, so there is also a business logic to it. ByteDance’s short-form video streaming app TikTok has taken hold, while the city is home to Tencent’s largest office outside of China for its global interactive entertainment operations. Chinese investment funds are also arriving: Sean Tong, co-founder of Chinese private equity firm Boyu, is among the big-name investors to have moved.

This is a natural extension of Singapore’s $150 billion relationship https://nam02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.singstat.gov.sg% 2Fmodules% 2Finfographics 2F-%%% 2Fmedia 2FFiles% 2Fvisualising_data 2Finfographics%%% 2Ftrade_and_investment 2Fsingapore-International trade.pdf & data = 04% 7C01% 7CThomas.Shum 40thomsonreuters.com%%% 7Ca93469594e3d4fe5905c08da11f5c966 7C62ccb8646a1a4b5d8e1c397dec1a8258% 7C0% 7C0% 7C637842044590730876% 7CUnknown% 7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0% 3D% 7C3000&sdata=R%2BoUoCx98eNoo9lgfN9r6SGzVee0AxBidkZVBrQ1kwE%3D&reserved=0 in Singapore 30% of the population https://nam02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.singstat.gov.sg%2F-%2Fmedia%2Ffiles%2Fvisualising_data%2Finfographics%2Fc2020 % 2Fc2020-literacy homelanguage.pdf & data = 04% 7C01% 7CThomas.Shum 40thomsonreuters.com%%% 7Ca93469594e3d4fe5905c08da11f5c966 7C62ccb8646a1a4b5d8e1c397dec1a8258% 7C0% 7C0% 7C637842044590730876% 7CUnknown% 7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0% 3D% 7C3000 & sdata = ad75idty1 2FCPPh%%% 2B0z8tUr92grRXBTqtnTbPLFP80F2A 3D reserved=0 speak Mandarin – the most common dialect in mainland China – as their primary language, compared to only 2% of Hong Kong residents https://nam02.safelinks.protection.outlook.com/?url=https% 3A%2F%2Fwww.census2021. gov.hk% 2Fen% 2Fmain_tables.html & data = 04% 7C01% 7CThomas.Shum 40thomsonreuters.com%%% 7Ca93469594e3d4fe5905c08da11f5c966 7C62ccb8646a1a4b5d8e1c397dec1a8258% 7C0% 7C0% 7C637842044590730876% 7CUnknown% 7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXV CI6Mn0% 3D% 7C3000 & sdata = a1XvUBDx5z21b 2FF9XpxK1BQIYC8oOQ4TglS2%%% 3D & 2BEjiUT4 reserved =0. This reinforces its advantage as a place where those doing business in India, Southeast Asia and China can meet.

Its lenders and airlines also appear solid, bolstering its image as a hub. DBS is leading an overseas push by Singaporean banks into India, China and Taiwan, making bolt-on acquisitions, partly filling a retail banking void left in markets abandoned by Citi. And its national operator is in a strong position to support regional connectivity. Sovereign wealth fund Temasek launched Singapore Airlines first-class financial lifeline secure-business-class-bailout%2F&data=04%7C01%7CThomas.Shum%40thomsonreuters.com%7Ca93469594e3d4fe5905c08da11f5c966%7C62ccb8646a1a4b5d8%a70C8%adec397%a70C8e1c 7C637842044590730876 7CUnknown%%%% 3D% 7C3000 7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0 & sdata = pPKTfOhnCk9v6UfzNrKL 2F8Fhoh24awxFbhXNRDtNppc% 3D% and reserved = 0 at the beginning of the pandemic; Hong Kong’s Cathay Pacific, on the other hand, is still struggling.

CHAMPAGNE PROBLEMS

Nothing complicates social relationships quite like success, however. While wealthy Singaporeans are taking advantage of increased business, many nonetheless lament the tacky Bentleys acquired by mainland Chinese upstarts cluttering car parks. The cost of a license large car 2Fpdf% 2FM11-COE_Results_2020_2022.pdf & data = 04% 7C01% 7CThomas.Shum 40thomsonreuters.com%%% 7Ca93469594e3d4fe5905c08da11f5c966 7C62ccb8646a1a4b5d8e1c397dec1a8258% 7C0% 7C0% 7C637842044590730876% 7CUnknown% 7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0% 3D% 7C3000 & sdata =wyjoeE83eiIYPg5pIvX4OGzgIL%2FeSNBRNjV6kpbt1rk%3D and reserved=0 has more than doubled three years to around S$90,000 ($73,000). Rents for high-end properties are skyrocketing and places in the best private schools are becoming scarce.

Among the nearly 80% of the population who live in government-built housing, Singapore’s welcoming attitude towards money is likely to drive up the overall cost of living. Headline inflation rose 4.3% in February, its fastest pace in nine years. So while Singapore is quietly courting the rich, it is loudly tightening work visas. The government plans to raise taxes on goods and services next year and is exploring ways to get the most out of the wealthy.

The durability of Singapore’s advantage will come under further test once the pandemic disruptions in Asia ease. For all immigration concerns, the population of the city contracted https://nam02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.singstat.gov.sg%2F- 2Fmedia 2Ffiles%%%% 2Fpublications 2Fpopulation% 2Fpopulation2021.pdf & data = 04% 7C01% 7CThomas.Shum 40thomsonreuters.com%%% 7Ca93469594e3d4fe5905c08da11f5c966 7C62ccb8646a1a4b5d8e1c397dec1a8258% 7C0% 7C0% 7C637842044590730876% 7CUnknown% 7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0% 3D% 7C3000% & sdata = rxZB 2Bg2jS2wO95eMBS7YCU %2B0oDk1uSo%2F2F%2BV0F7s%2BRI%3D and reserved=0 for a second consecutive year in the twelve months to June 2021, driven by a nearly 11% drop in non-residents. Other headwinds include collapsing valuations in the tech sector and the risk of Beijing becoming thorny in how the hub helps Chinese capitalists hedge against government policies. Rebalancing Singapore is a tricky business.

Follow @ugalani https://twitter.com/ugalani on Twitter

BACKGROUND NEWS

– Singaporean Prime Minister Lee Hsien Loong visited the White House on March 29.

– U.S. President Joe Biden planned to discuss Russia’s invasion of Ukraine and China’s role in the Indo-Pacific with Lee at the meeting, Reuters reported, citing a senior administration official.

(Editing by Pete Sweeney and Thomas Shum)

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.




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