It could be argued that the stage is set for Singapore to claim the title of the premier financial services hub in Asia, a role it has long shared with Hong Kong.
The continued political unrest in the special administrative region has made some firms and investors nervous, with the first anniversary of the protests against the now-withdrawn extradition bill falling on 15 March.
The unrest was one of the reasons the SAR entered its first recession in a decade during the third quarter of 2019, which deepened in the final three months of last year.
The emergence of a novel coronavirus, named covid-19, has done little to allay concerns.
With a land border to China, which is at the epicentre of the outbreak, Hong Kong is in a tough spot.
It is important to note, however, that the SAR lies over 900km south of Wuhan where the virus was first detected.
That isn’t to say covid-19 doesn’t have potentially significant consequences for Singapore as well.
As of 3 March, Hong Kong had 101 confirmed cases whereas Singapore had 108.
China is one of the city-state’s biggest trading partners.
Singapore’s ministry of trade and industry subsequently downgraded its economic growth forecast for 2020 from between 0.5% and 2.5% in November to, last month, predicting it will be between -0.5% and 1.5%.
This opens up the slim possibility of a recession, which last occurred in Singapore in 2001.
While the situation is ongoing, it is not possible to predict the outcome, however, it is fair to say the Lion City is starting off on stronger footing.
Market uncertainty
Global markets appear unsure how to respond to the coronavirus outbreak, having taken a hammering during the last week of February as nervous investors responded by selling off positions.
Anyone who follows the tenets of Warren Buffet, however, knows that that is the time to buy.
But what to invest in?
The reality of the situation is that nobody can even begin to guess what is going to happen or how long covid-19 will linger.
During the severe acute respiratory syndrome (Sars) outbreak in 2003, global markets fell 10% during the six months it was active.
But can that really be used to predict what will happen with covid-19?
Some say yes, while others argue that the world is a very different place compared with 17 years ago. China in particular.
Green shoots
Market shocks and unprecedented or unexpected political developments can trigger panic among investors, as evidenced by the sell-off in late February.
This is where a financial professional can help clients either stay on track or make adjustments to ensure they ride out the economic shocks with little lasting damage.
But the advisory market in both Singapore and Hong Kong have been characterised in recent years by significant M&A activity and consolidation, leaving fewer and fewer options for clients to pick from.
While there has been little movement in the SAR, the Singapore financial advisory sector recently welcomed two new entrants.
Further evidence of the growth story in the Lion City.
Familiar faces
Avrio Wealth and TallRock Capital became the first individuals (rather than large firms) to be granted financial adviser licences by the Monetary Authority of Singapore (MAS) in around a decade.
It takes the number of such firms operating in the city-state to 66 – including domestically and internationally-focused businesses.
While the names above the door may be new, the people behind the ventures have worked in the Singapore financial advisory and wealth management space for many years.
Ann Marie Regal set up Avrio Wealth with her former Globaleye colleague Andrew Talbot and ex-PIAS certified financial planner Michael Borchert.
TallRock is run by Shane Coelho and Greg Atherstone who worked together for six years prior to starting out on their own; first at IFS and then JPara Solutions.
Another ‘new’ development in the city-state was the recruitment of ex-Globaleye group chief investment officer Shreemati Varadarajan by AAM Advisory.
Bringing home the best
Speaking to International Adviser, the newly appointed head of investments described the move as “a very interesting opportunity”.
After nearly seven years at Globaleye and a seven-month stint at Farringdon Asset Management, Varadarajan has seen Singapore change a lot.
When it comes to discussing the city-state’s strengths, she points to the MAS.
A comparatively new regulator on the world stage, she says “they are trying to bring in the best practices from across the globe”.
“The regulator wants to have the highest standards in terms of quality of advice, client protection and good client outcomes.”
With the introduction of a commission cap, rather than an outright ban as the UK financial watchdog did, she says the MAS “evaluates global regulation and implements it to suit the local jurisdiction”.
Its support of the fintech sector is another example of how it is taking a proactive role.
Varadarajan has no fears that it could take over the advisory sector, though.
“Technology is an enabler. It can’t capture client aspirations, provide human contact, bring empathy, understand the client’s journey and work with them on their financial journey,” she says.
Nor can fintech necessarily pick up on growing trends and interests through natural conversation.
Going green
One such development Varadarajan has seen is rising interest in ESG, a trend that has long been core in European investments and is rapidly gaining traction in the US.
It has, however, not generated much interest in Asia – but that seems set to change.
“Over the last 18 to 24 months, we’ve seen a lot of interest from clients for sustainable investing,” an area on which AAM intends to put more of its focus, Varadarajan says.
“Initially, investors didn’t have a very positive outcome from investing in ESG themes because the underlying assets were not able to perform.
“But, over the past few years, we’ve seen a lot of fund managers and ETF providers make the necessary changes to align their ESG products with more of an ‘alpha-tilt’.”
She adds: “We have seen a lot more solutions become available that we can offer our clients which are cost efficient and focus on generating alpha, even through they are sustainable opportunities.”
Upward and downward?
At a very superficial level, Hong Kong appears to be laden with political, economic and geographical proximity woes that have resulted in a recession that looks to be getting worse.
In contrast, Singapore seems to have a growing financial advisory sector, political stability and a watery buffer between it and China.
But I would argue that people should write Hong Kong off at their peril.
At this point, Singapore has more confirmed covid-19 cases than the SAR. While Hong Kong is in recession, Singapore is facing one.
And, most importantly, financial services and other businesses in Hong Kong have continued to operate throughout the demonstrations and political unrest.
Which could mean they are better prepared to weather the coronavirus storm.
It is highly likely that Singapore and Hong Kong will continue to share the financial services spotlight for the foreseeable future.
