Singapore’s safe haven status amplified as geopolitical risks rise 

IN a post-pandemic world that is seeing increasing geopolitical tensions and uncertainties, Singapore has solidified its status as a safe harbour for wealthy investors navigating turbulent seas.

Companies and investors, caught in the middle of an increasingly contentious US-China relationship – the world’s number 1 and 2 economies – are seeking their own form of strategic autonomy to navigate this.

Gary Harvey, chief executive officer (CEO) of St James’s Place Singapore, told BT: “Singapore has a unique proposition in that while it is closely linked to the rest of Asia, it is not integrated directly into China’s economic system.

“This framework allows Singapore to maintain its position as a convenient alternative for many of Asia’s affluent outside of China, yet allowing them to stay closely connected to some of the fastest growth regions in the world.”

The FTSE 100-listed wealth manager, with more than £140 billion (S$236 billion) in funds under management, is seeing many family offices and wealth management firms set up shop in Singapore. 

In the 12 months to Dec 2020, the number of family offices in Singapore has doubled to 400, and a year later to 700, according to some estimates.

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While Hong Kong, with its proximity to China, remains a convenient destination for offshore Chinese wealth, more wealthy families and individuals are seeking to spread their risks and diversify their wealth outside the mainland. Singapore is increasingly favoured as it is less connected to Beijing from a regulatory, political, and financial perspective.

A wealth migration report by Henley and Partners, an investment migration consultancy, estimated that 10,000 high net worth individuals (HNWI) in China with a combined US$48 billion in wealth and 3,000 HNWI in Hong Kong worth US$12 billion are seeking to leave this year.

The Singapore government’s handling of the Covid-19 has accentuated the city-state’s allure. In contrast, Beijing’s zero-Covid policy has kept borders closed to most travellers since March 2020, even as the rest of the world opens up.

“The ease of doing business in Singapore is evident even during the global Covid-19 pandemic, when the government navigated the country to adapt with the health situation while ensuring minimal disruption and impact on the economy. As a result, despite the pandemic, we were able to grow our wealth and asset management industry,” said Seck Wai-Kwong, CEO of Eastspring Investments Group – Prudential’s asset manager with US$258 billion (S$355 billion) of assets under management (AUM). In 2020, Singapore’s AUM grew 17 per cent, outpacing a global AUM growth rate of 11 per cent.

Singapore’s secure and stable legal system, regulatory framework and political stability help the city-state stand out in the region.

Asheesh Chanda, CEO and founder of Kristal.AI, a digital-first private wealth advisory and fund management group, said these factors plus the country’s science-based practical handling of the pandemic has added to its allure with expatriates, who have been relocating to Singapore in droves, as evidenced by the steep hike in demand for high-end residential accommodation and spots in international schools.

Kristal.AI’s diverse client base of entrepreneurs, wealthy families, PMEBs (professionals, managers, executives and businessmen) from over 20 countries are also enticed by the city-state’s tax system.

“There is no capital gains tax, no inheritance tax and estate duties. All these favourable factors combined make Singapore a top destination of choice, which is why we have over 70 per cent of AUM here coming from overseas,” Chanda added.

Sophie Mathur, Corporate/Mergers and Acquisition partner and Asia head of Corporate at Linklaters, said that Singapore is benefiting from the ecosystem it has established.

“Many family offices have set up operations here, which has had the effect of Singapore becoming an attractive venue for fundraising for asset managers. It has also added depth to Singapore’s angel investment and venture capital investment ecosystem.”

Structures such as the Variable Capital Company (VCC) structure (which was introduced together with a government grant to defray the set-up expenses), tax incentives and a pool of professional services providers complete the “virtuous circle”.

In addition, the growth of the arts, entertainment and leisure sectors have also helped to make Singapore more attractive to global citizens and talent too. Shu Ping, the billionaire behind Haidilao International Holding, an operator of hotpot restaurants, and Ray Dalio, the billionaire founder of Bridgewater Associates, have both set up family offices in Singapore during the past 2 years. 

As the de facto financial capital in South-east Asia, Singapore also offers access to wealthy clientele based in neighbouring cities such as Jakarta, Bangkok and Manila, as well as access to investment opportunities in emerging markets such as Vietnam and Indonesia, and their start-up scene. 

As the nation celebrates its 57th National Day, experts cautioned its open economy, which is a net importer of goods, makes Singapore particularly susceptible to global inflationary pressures.

Harvey said: “Challenges like the persistent rise of inflation and a slowing economic recovery will keep eyes focused on how Singapore policymakers react. Investors are also watching how strategies addressing long-term challenges like climate change and income inequality further enhance the nation’s business-friendly reputation.

“As we move forward, Singapore will have to master major trends that are reshaping the global economy whilst also speeding up the structural transformation of its own economy to retain its leading position,” he said.

Yu Liuqing, country analyst, Asia at EIU, believes that inflation is likely a short-to-medium term issue. The Monetary Authority of Singapore (MAS) has aggressively tackled inflationary pressures by tightening its monetary policies 4 times since Oct 2021, with 2 being the out-of-cycle ones.

A bigger challenge will be the heightened Sino-US rivalry, instead: ”The city-state is expected to maintain its neutral stance and reject picking a side,” Yu said.

The post-Covid world will require Singapore to again reinvent itself as companies in the Asia-Pacific region look to diversify their supply chains.

Nithin Chandra, managing partner, South-east Asia at Kearney, said: “The onus is on Singapore to sharpen its supply chain offerings by building capacities in high-tech manufacturing, precision engineering, and high potential service sectors like fintech and artificial intelligence, by adopting an Asean view to lead the entire bloc of countries.”

This will not be the first time that Singapore has weathered a storm. Throughout historical black swan events such as the 2008 Great Recession and the Covid-19 pandemic, Singapore’s economy has proven to be resilient. Its resilience is rooted in strong macroeconomic fundamentals including robust capital reserves, sound policies, and a willingness to take timely and effective measures to counter the adverse effects of such crises.

“Singapore’s long track record of prudent fiscal and monetary policies has been a great asset, as it helped reassure markets time and again that the fiscal and monetary easing measures in response to such adverse events are less likely to result in a deviation from its long-term economic goals,” Harvey said.