New tier among wealthy eyes offshore havens

Top News | BLOOMBERG 16 Jul 2019

A new tier of wealthy investors worried about the long-term effects of the political crisis are setting up ways to move their money out of Hong Kong more quickly, bankers and wealth managers said.

A major wealth manager said it has received a large flow of new money in Singapore from Hong Kong over recent weeks.

One Hong Kong private banker said the majority of the new queries he receives are not coming from the super-rich, most of whom already have alternative destinations for their money, but from individuals with assets in the US$10 million (HK$78 million) to US$20 million range.

"Even for those who think the protests will blow over, will die down, their conversations have become: change is coming, how are we planning?" said Clifford Ng, a managing partner at the Zhong Lun Law Firm in Hong Kong who specializes in advising rich clients on cross-border transactions and investments.

The recent demonstrations are the latest trigger in a long process of Chinese money flowing to Singapore, London, New York and other centers outside Beijing's reach. Singapore's US$2.4 trillion asset management industry has been one of the main beneficiaries because of advantages such as political stability, language and rapid air connections with China.

With the accelerating investor interest in Singapore, the Monetary Authority of Singapore asked the country's financial institutions not to deprecate Hong Kong publicly because of the demonstrations, sources said. The MAS wants to avoid the perception that Singapore is benefiting from Hong Kong's misfortunes, they added.

Client inquiries were running at about four times the usual levels after the protests started, said the Hong-Kong based chief executive officer for Asia at another private bank. He said the level of interest reduced after the initial panic as people realized they have time to shift their assets if needed.

He said his clients are not yet moving much money, but are setting up channels to shift funds quickly if the situation deteriorates.

"It's a no-cost hedge for them," said Ng, adding that the level of interest has not changed since Hong Kong shelved the extradition bill.

MAS managing director Ravi Menon said last month that discussions with financial institutions had shown "no signs of significant shift of business, of funds" at the time.

Setting up an offshore account generally takes longer than before the financial crisis due to know-your-customer procedures and stricter rules to deter money laundering. While an existing client with a stable job might open one within three weeks, for customers with complex company holdings or connections it could take six months, the private banker said.

"We've received increased amount of client inquiries about the Hong Kong situation in the past weeks," said Lawrence Lua, the deputy head of private banking at Singapore's DBS Holdings. "Investors, businessmen and wealthy individuals - they love orderliness and rule of law. It is not unreasonable to say that they are exploring alternative locations" in case the situation in Hong Kong does not improve.

Hong Kong remains by far the most popular destination for mainland wealth due to its proximity, ease of opening a bank account and language issues. A Shanghai-based relationship manager at Jupai Holdings, one of China's largest private wealth managers, said the city is still the first destination for over 90 percent of his clients.

Family offices, an increasingly popular way to manage the wealth of Asia's super rich, are more likely to choose Singapore over Hong Kong as their base, according to David Chong, chairman of Labuan, Malaysia-based Portcullis Group, an independent trust company that provides advice to family offices and high-net-worth individuals.

Chong said he is aware of family offices that manage at least US$200 million of assets which are now looking to locate in Singapore rather than Hong Kong because of the demonstrations.

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