Finance

Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

Singapore doesn't like to leave things to chance, so when there's a play to be made for a slice of London's financial business, you can expect the city-state to pull out all stops.

That's what it did on Monday. The Monetary Authority of Singapore unveiled what it calls an "industry transformation map" for wealth and asset management, foreign-exchange trading, insurance and fintech businesses. The goal is to create 4,000 net new jobs annually, and achieve real growth in the financial services and technology sector of 4.3 percent a year through 2020. The London angle hasn't been made explicit, though it's probably top of policy makers' minds.

Banks, fund managers, investment firms, insurers and reinsurers, insurance intermediaries, payment-services providers and e-money issuers based in the U.K. all risk losing unfettered access to EU markets, regardless of where they're incorporated, Bloomberg Intelligence analyst Sarah Jane Mahmud wrote last month.

Although the final details of Brexit are unclear, that's not stopped Asia's two rival financial centers -- Hong Kong and Singapore -- from pitching their tents. Hong Kong is setting up a new derivatives regulatory regime, while the MAS said it wants foreign-exchange players to anchor their order matching and pricing engines in the city. With an almost 8 percent share of global foreign-exchange trading, compared with 37 percent for London, Singapore has a long way to go to challenge the market leader.

Asian Ambitions
With an almost 8 percent share of global foreign-exchange trading, Singapore has a long way to go to challenge the market leader
Source: BIS Triennial Central Bank Survey 2016

The important thing, however, is that the island-city has seen an opening. It's offering to harness technology to simplify compliance. For private banks, Singapore is dangling the carrot of a more efficient, electronic know-your-customer regime. (Hong Kong, meanwhile, has told lenders they don't need to bother verifying customers' addresses.) It's also promising the use of distributed ledgers for interbank payments and trade finance.

Singapore hopes these innovations will form the bedrock for its many ambitions. The city-state wants to be everything from a capital-raising hub to Asia's leading fixed-income market and infrastructure financing center. It also wants to be home to a blockchain-based marketplace for insurance.

Size Matters
Hong Kong's equity market is streets ahead of Singapore in terms of fundraising by companies
Source: Bloomberg

Will all of it happen? Maybe not. Hong Kong has several advantages. Its IPO market helped companies raise $25 billion last year. Including rights offerings, firms raked in $44 billion. Singapore's total was $4 billion. In asset management, both are comparable. Singapore had $1 trillion in discretionary asset management last year, plus another $900 billion under private banking-type advisory businesses. The total for Hong Kong, including both asset management and private wealth mandates, was $2.3 trillion.

Both cities are embracing fintech. Singapore is adopting a nationwide QR-code-based payment system, while taxis in Hong Kong will soon accept Alipay, a payments platform owned by Alibaba Group Holding Ltd.'s affiliate Ant Financial.

The final arbiter of success in this rivalry may be openness to talent. For the last several years, Singapore has tightened the screws on foreign workers even though its own talent pool is too small and shallow to allow an entirely new, tech-oriented finance industry to take shape. Ong Ye Kung, the minister for higher education and skills, has said the central bank will work with the Ministry of Manpower to attract international talent with specialized expertise, plus facilitate the transfer of capabilities to local professionals.

If that leads to a somewhat more relaxed visa regime, bankers in Singapore will be relieved. It's one more notch up the Asia leaderboard.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Andy Mukherjee in Hong Kong at amukherjee@bloomberg.net

To contact the editor responsible for this story:
Katrina Nicholas at knicholas2@bloomberg.net