In recent weeks, Singapore has roared back to post-pandemic life, while Hong Kong residents have been left watching from afar.
Speculation that Hong Kong has been severely weakened by strict Covid policies and a shrinking workforce seemed to be reinforced by the latest Global Financial Centres Index, which saw Singapore overtake its rival financial hub.
But as Hong Kong makes moves to end its pandemic isolation, it's clear both places have their particular financial strengths. Here's what Bloomberg Intelligence analysts Francis Chan and Peter Lau see as the cities' respective merits in five key areas:
Hong Kong is likely to remain the bigger center for equities over the next five years. The city has hosted 84 initial public offerings so far in the third quarter, raising more than $7 billion, compared to just five deals and $1.6 billion raised in Singapore. And more US-listed Chinese companies may seek Hong Kong listings in 2023, boosting the city's current market capitalization of $4.1 trillion — which already towers over Singapore's $620 billion market value. The Chinese city is likely to keep its lead in the equity business unless Western governments impose extensive sanctions on China.
That said, Hong Kong's share of Asian listings has fallen to a two-decade low this year, with dwindling deals leading to layoffs at Goldman Sachs, Credit Suisse and UBS. Shanghai and Shenzhen account for 69% of Asia's IPO haul in 2022, the highest on record.
Singapore's status as a wealth hub may benefit as Hong Kong's strict Covid policies — and Beijing's tightening grip on the city — prompt more people to leave. Hong Kong's population dropped by a record in the first half of 2022, and its wealth and cross-border assets risk missing Boston Consulting Group's 8% average annual growth forecast through 2026.
Meanwhile, Singapore is likely to beat BCG's 10% growth estimate, with an increasing number of ultra-high-net-worth families targeting the city as a base for their family offices. That figure rose to 221 in 2020 from just eight in 2017, according to Illumine Advisory. However…
Finance professionals get higher pay in Hong Kong than in Singapore, which may benefit the city when trying to attract overseas workers. Average total compensation, including both salary and bonus, approaches $300,000 for finance professionals in Hong Kong — 52% higher than in Singapore, according to eFinancialCareers' 2022 report. And high earners pay lower tax in Hong Kong, with a top rate of 17% compared to Singapore's 22%.
Those working in front-office, private equity and hedge fund jobs could get much bigger pay checks in Hong Kong, with a smaller advantage for those in back- and middle-office posts.
Hong Kong and Singapore have similar trading volumes and shares of the global foreign-exchange market, trailing London and New York, according to the 2019 Triennial Central Bank Survey. Average daily forex turnover came in at $417 billion for Hong Kong and $340 billion for Singapore in 2022, according to CompareForexBrokers.com.
The cities are Asia's key dollar centers, while Hong Kong has a slight edge on dollar pair trades for the local currency and the yuan.
Turmoil in China's property sector and surging US Treasury yields have limited foreign investors' appetite for Chinese dollar bonds, keeping volume in check in Asia ex-Japan. The high-yield debt market, historically dominated by mainland property firms, has practically dried up since mid-June, reducing demand for fixed-income traders and bankers in Hong Kong more than Singapore.