[Marxism] Question, re: Role of Singapore?

Marv Gandall marvgand2 at gmail.com
Thu Nov 13 17:43:07 MST 2014

On Nov 13, 2014, at 5:05 PM, Allen Ruff via Marxism <marxism at lists.csbs.utah.edu> wrote:

> Wondering if anyone out there can suggest some readings on the role of Singapore as a center of finance in the global circuits of capital?  Especially interested, in regard to the extraction and flows of gas, oil and other energy across Asia, and the Pacific.

This might be helpful as a start, Allen. From the Financial Times last month. Note that “Singapore has attracted dozens of global commodity trading firms, exploiting its position as the world’s largest bunkering port, straddling sea lanes to and from commodity-hungry China. Gunvor, the world’s fourth-biggest oil trader, has added about 20 per cent to its staff in Singapore in the past nine months…Commodity derivatives are the fastest-growing part of business on SGX, the Singapore exchange.” There’s undoubtedly more of what you’re looking for in the IMF study alluded to in the report.

*	*	*

Singapore jostles with Hong Kong for financial crown
By Jeremy Grant in Singapore
Financial Times
October 16 2014

When Michael Milken, pioneer of the 1980s junk bond market, held the first Asia-based conference of the Milken Institute last month, he decided to do it in Singapore – where he had established a branch of his think-tank a year earlier.

The choice of the Asian city state was striking. Hong Kong might have been a more obvious location, given its proximity to China, the world’s second-biggest economy and home to a financial centre that is the gateway in and out of the country’s rapidly maturing capital market.

But Mr Milken says that many of the institute’s “stakeholders and partners” – banks, insurance companies, private equity groups, asset managers and institutional investors – already had senior executives for Asia based in Singapore.

“One of the reasons why we chose Singapore is because we felt that it could be a symbol for Asia and what the standards – be they legal, accounting, financial or regulatory – could be for the rest of Asia,” Mr Milken says.

Singapore is unlikely to have featured in Mr Milken’s calculations as recently as five years ago.

However, its rapid rise as the region’s largest centre for both commodity and foreign exchange trading – as well as its growth as a wealth management hub – has created a new competitive dynamic in Asia, which bankers in western financial capitals are watching closely.

“Singapore is really well-positioned to compete with Hong Kong,” says Glenn Hubbard, dean of Columbia Business School. “If you think about transparency, openness and business integrity Singapore has all that in spades.”

Rivalry between the two cities also highlights how financial centres in Asia have made their mark since the 2008 financial crisis forced a punishing process of deleverage and regulatory reform on London and New York.

While both western centres are again on the rise, increasing wealth generation in Asia inevitably raises the question of which centres in Asia are likely to dominate what is still the world’s fastest-growing economic bloc.

Hong Kong’s financial centre was well-established as an Asian outpost of the City of London even as Singapore was only starting to build, from scratch, an Asian dollar market in the 1960s.

Today it remains unchallenged in Asia in terms of equities and initial public offerings. The territory ranks third after New York and London so far this year with 67 new listings, valued at $17.6bn, while Singapore trails at 19th, with a mere 8 listings worth $1.9bn, according to Dealogic.

That position will be bolstered by the launch next month of Shanghai-Hong Kong Stock Connect, which promises to allow for the first time Hong Kong and foreign investors with offshore renminbi to access the Shanghai market.

“Hong Kong shouldn’t be recognised as just a centre for equities; it should be seen as a much wider access to a range of financial assets to China overall,” says Sean Darby, Hong Kong-based global head of equity strategy at Jefferies, the US investment bank.

But Singapore has attracted dozens of global commodity trading firms, exploiting its position as the world’s largest bunkering port, straddling sea lanes to and from commodity-hungry China. Gunvor, the world’s fourth-biggest oil trader, has added about 20 per cent to its staff in Singapore in the past nine months.

Part of the attraction has been corporate tax rates on offer that are lower than the basic rate of 17 per cent, compared with 16.5 per cent in Hong Kong, where there is a much smaller set of commodity traders focused mostly on base metals.

Commodity derivatives are the fastest-growing part of business on SGX, the Singapore exchange. Global exchanges are building up their Asian presence through acquisitions in Singapore, with IntercontinentalExchange buying the Singapore Mercantile Exchange and Deutsche Börse’s plans to build a clearing house in the city-state.

In forex, Singapore overtook Tokyo last year to become the largest hub in Asia and third-largest after London and New York. Financial services now accounts for 12 per cent of Singapore’s gross domestic product, not that far behind Hong Kong on 16 per cent, official data show.

Yet Hong Kong still overshadows Singapore in wealth management, and has more billionaires than its smaller rival: 82 versus 32, according to Wealth-X, a research company.

The two centres combined are expected to overtake global leader Switzerland, possibly by 2015, according to the Boston Consulting Group. It reckons that, as of the end of 2013, total assets under management in Hong Kong were $2.2tn, just behind Switzerland on $3.7tn. Singapore came third with $1.4tn.

The longer-term threat for Singapore, bankers say, is from Hong Kong’s growing role as a gateway to and from China's maturing capital markets.

Hong Kong Exchanges & Clearing, which has teamed up with its counterpart in Shanghai on the “stock connect” project, has ambitions to expand in renminbi-denominated assets, including commodities, in anticipation of China opening its capital account. Its purchase last year of theLondon Metal Exchange was one step in that direction.

For bankers, though, Singapore’s attraction partly lifestyle: it is largely pollution-free, unlike Hong Kong, and has more urban green space than its densely high-rise northern neighbour.

Accommodation is cheaper, too. Savills, the property agency, estimates that prime residential rents in Singapore average $1,711 per week, versus $2,446 in Hong Kong – the most expensive city in the world*.

Joel Hurewitz, who heads product strategy for Asia Pacific at broker Instinet, has lived in Hong Kong for the past 14 years. He says he has seen a number of broking colleagues “decide that they’ve had enough with the partying in Hong Kong”.

“So, when it comes time to launch a hedge fund, for example, Singapore seems the obvious choice as a lifestyle move,” he says. That may explain why, according to the Monetary Authority of Singapore, hedge fund assets under management in the city state jumped 21 per cent in 2013 to S$89bn.

Both Singapore and Hong Kong are former British colonies, with similar legal systems based on English common law and courts that have expertise in hearing commercial cases.

But some lawyers suggest Singapore could benefit from creeping doubt in Hong Kong over how the neutrality of its judicial system – a bedrock of its success as a financial centre – can be safeguarded since the publication in June of a white paper by China that called on judges to be “patriotic”. The political fallout from the recent “Occupy Central” protests have fuelled such concerns.

“I think what’s embedded in Singapore is the fact that it’s the ultimate neutral venue in Asia. Hong Kong – even without the recent problems – is not that, in the sense that it has a strong China bent,” says Prakash Pillai, a partner in the Singapore office of law firm Clyde & Co.

For those wondering which Asian financial centre is likely to emerge as dominant in the short term the answer may be neither.

In a study on Singapore and Hong Kong as financial centres published in July, the International Monetary Fund pointed out that Singapore and Hong Kong increasingly complement each other by serving two distinct regions: north Asia and China in the case of Hong Kong and Southeast Asia for Singapore.

But for many Shanghai is the ultimate threat. Its free-trade zone is the clearest sign of the city’s ambitions to become the region’s financial centre, eventually rivalling London and New York.

Jim Rogers, the commodities guru who has made Singapore his home since 2007, says: “Hong Kong and Singapore have a window before China fully opens up. Before the second world war Shanghai was the largest financial centre along with London and New York – and it will be again.”

*This article has been amended since original publication to reflect the fact that prime residential rents in Singapore are not half those in Hong Kong.

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