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Home Focus on Singapore: an emerging global financial powerhouse
December 19, 2017

Focus on Singapore: an emerging global financial powerhouse

From humble beginnings as a colonial outpost, Singapore is fast emerging as a premiere hub for investment and wealth management. With government initiatives such as ‘Smart Nation’ reflecting its go-ahead attitude, global investors are increasingly looking to Singapore for its capital raising potential and connectivity to other Asian markets.

 

Business and financial attractiveness

The latest international rankings demonstrate Singapore’s attractiveness as a regional headquarters for multinationals and other businesses, as well as its financial prowess.

The World Bank’s 2018 ‘Doing Business’ survey gave Singapore the second-highest rating among the 190 economies surveyed (Australia placed 14th by comparison).

Singapore also ranked highly in Z/Yen’s September 2017 ‘Global Financial Centres Index’ report, which placed the Lion City fourth globally, trailing only Hong Kong, New York and London among the 108 centres surveyed. Australia’s highest place was earned by Sydney, which ranked eighth.

Singapore was rated fourth-best for business environment, human capital, infrastructure and financial sector development, and third-best for its reputation. It also placed fourth-highest for banking, investment management and professional services.

By all accounts, Singapore’s success in the ratings demonstrates it has the capabilities and infrastructure to live up to its ever-increasing reputation as a major global financial centre.

Wealth industry expands

Other data also highlights Singapore’s strengths as a wealth management hub. Knight Frank’s 2017 ’Wealth Report’ showed that Singapore boasted some 2,500 ultra-high net worth individuals (UHNWIs) with more than US$30 million in assets, a ratio of 4.5 UHNWIs for every 10,000 people.

The ‘Knight Frank City Wealth Index 2017’ ranked Singapore sixth overall, a placing it is expected to improve on based on investment, connectivity and future wealth estimates.

Total assets managed by the nation’s 660 locally-based fund managers grew by 7% to reach S$2.7 trillion (A$2.6 trillion) in 2016, the Monetary Authority of Singapore (MAS) said in its annual survey.

The MAS said it aimed to further “deepen its venture capital and private equity capabilities,” with a simplified regulatory framework for venture capital managers planned by the end of this year.

The financial sector currently accounts for around 13% of Singapore’s gross domestic product (GDP) and employs 200,000 people, but the authorities are seeing potential for further expansion.

In October 2017, the MAS announced plans aimed at strengthening its status as a leading financial hub in Asia. Under its road map, Singapore aims to create thousands of net new jobs in financial services and financial technology by 2020, aiming to achieve real growth in the sector of 4.3% a year, faster than the overall economy.

“With technology transforming the way financial services are produced, delivered, and consumed, it is critical that Singapore’s financial sector also transforms, to stay relevant and competitive,” the MAS said.

The central bank will collaborate with financial institutions to create common utilities for services including electronic payments, as well as developing solutions for inter-bank payments and trade finance. It also plans to expand cross-border cooperation with other fintech centres to make Singapore a base for foreign start-ups.

The MAS also eyes making the nation Asia’s top centre for capital raising, enterprise and infrastructure financing, along with fixed income and insurance. It is already ranked as the world’s third-largest foreign exchange centre.

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Capital raising capacity

Singapore’s capital raising capacity is well established with more than US$1 trillion raised through debt and equity issues in the decade through to 2015. According to the Singapore Exchange (SGX), listed companies raised 50% more funds through the secondary market than at initial public offering stage.

While the SGX had a market capitalisation of around US$640 billion at the end of 2016, just over half of Australia’s US$1.21 trillion, Singapore had a substantially greater proportion of foreign listings, with overseas companies making up around 37% compared to just 6% in Australia.

Singapore’s bourse states it is “the world’s most liquid offshore market for the benchmark equity indices of China, India, Japan and ASEAN…Headquartered in AAA-rated Singapore, SGX is globally recognised for its risk management and clearing capabilities.”

 

Location equals connectivity

The Singapore Economic Development Board (EDB) also points to the nation’s status as a global transportation hub, with the world’s busiest container ports and airport linkages to 330 cities in 80 countries, along with the most extensive network of free trade agreements in Asia.

A nation of just 5.6 million, Singapore is taking advantage of its central location and building on its potential, with initiatives such as ‘Smart Nation’ seeking to foster technological improvements across a range of areas, from business productivity to health, transport and the environment.

“As an open economy, Singapore is impacted by global forces – geopolitical tensions, potential threat of anti-globalisation, and technology disruptions across many industries…But Singapore has strengths and achievements that place the country in a good position to succeed,” the government’s ‘Smart Nation’ initiative states.

For a republic founded a little over 50 years ago, Singapore today is well on its way to becoming a global financial powerhouse and one of the world’s premier investment and wealth management destinations.

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