Big money: A Chinese restaurant in Singapore. The city-state’s infrastructure and stability has attracted a growing number of ultra-wealthy individuals, contributing to a spike in costs for everything from luxury cars to golf club memberships and condominiums. — Bloomberg
SINGAPORE: When ultra-wealthy Chinese entrepreneurs started moving to Singapore en masse in 2019, investment firms were salivating at the chance to manage billions in new money. So far, it hasn’t quite happened.
Hedge funds, banks and private equity firms say few of their recent meetings with Chinese tycoons in the city-state have brought in business beyond basic custodian deals, even as the new arrivals spend lavishly on mansions, luxury cars and golf club memberships.
A senior executive at one of Singapore’s largest hedge funds described it as “one big zero”.
Another money manager, among the more than 10 interviewed, said none of the handful of inquiries has resulted in fresh funds to manage. They declined to be identified because they were discussing private matters.
Investors “are not coming with a bunch of cash in suitcases,” said Emmanuel Pitsilis, co-head of Asia-Pacific at Partners Capital Investment Group, adding that the new arrivals already have global investments in place, so any cash flowing into the country isn’t automatically being deployed to local capital markets.
The relative pittance of new business from super-wealthy Chinese emigrants is becoming a hot-button topic and a possible prelude to social discord as lawmakers seek answers from the government.
When tax exemption programmes were changed to attract family offices, part of the pitch was that the new money would boost investments and spark a wave of employment.
To be sure, plenty of cash is coming in, and family office assets at the city’s banks are on the rise.
But money managers say very little of that cash is being invested in funds or private equity firms that would generate the hefty fees needed to create a flood of jobs.
Finance executives cite two main reasons for the reluctance, even as outflows from China reach at least US$150bil (RM663bil) annually, according to Natixis.
The capital markets in Singapore and South-East Asia are tiny by Chinese or Hong Kong standards, and it takes time for these tycoons to feel comfortable with advisers they barely know.
Pitsilis said the newcomers have global allocations in place, and the region represents a new, unfamiliar market full of potential pitfalls.
Asian clients in general take longer to trust money managers compared with their counterparts in the United States, where a whole ecosystem of advisers and data providers make the decision easier, he said.
“Just because they’re changing locations” doesn’t mean they’re suddenly going to alter everything else and their investments, said Pitsilis, whose firm manages US$48bil (RM212bil) for family offices, endowments and other investors.
The local bourses meanwhile lack the liquidity and high-profile names on the scale of New York and Hong Kong.
Hong Kong’s total stock market value is more than 10 times higher than Singapore’s, according to data compiled by Bloomberg, while daily trading dwarfs its rival hub.
“All of Vietnam had a couple of billion dollars in private equity investment in 2021,” Pitsilis said, citing a report from Bain and Co. “That’s the same size as some of these family offices.”
The limited investment is surprising given there’s plenty of evidence the Chinese tycoons are setting up bases and spending loads of money on other things.
The Monetary Authority of Singapore last year estimated there would be about 700 family offices at the end of 2021.
Industry experts said the current estimate is more like 1,400, with mainland Chinese being the biggest drivers of growth, according to service providers.
The backlog alone of single-family offices applying for tax incentives and pending approvals is around 200Signs of Chinese wealth are easy to spot in Singapore. Many of the city’s historic black and white bungalows – newly converted to private bars for wine and whisky connoisseurs – are popular among Chinese billionaires. The price of golf club memberships for expats at the exclusive Sentosa Golf Club surged last year to US$840,000 (RM3.7mil) as more Chinese joined, according to brokerage Singolf Services.
Newcomers have snapped up luxury condos. High-end residential rents in the fourth quarter of 2022 were up 28% compared with a year earlier, helping the city push New York off the top spot for gains.
Licence fees for cars are hitting fresh records of almost US$90,000 (RM397,800).
Even the city’s palate is changing, according to Sing Tien Foo, NUS Business School professor of real estate.
A rising number of restaurants offer more hotpot items from Sichuan province, and spicy lamb skewers are favoured in Beijing to cater to the arrivals.
Visitors to Chef China Hua Chu’s restaurant are welcomed by a black-visored astronaut sporting a Chinese flag.
Sing co-authored a paper in 2020 that showed Chinese foreign buyers with high spending power tend towards “conspicuous consumption” and properties with visible features of luxury.
His research showed they also like to create their own enclaves and social networks in places like Sentosa, where foreigners are often granted exceptions to rules preventing non-citizens from buying mansions.
“We can’t stop this trend – more and more foreigners will find Singapore a very livable country, so they’d like to move over here, and the government is trying to attract the talent,” he said.
“They have to manage the sentiment properly. I think it’s a very sensitive social issue.”
Yet this flood of Chinese money hasn’t done as much for the financial services sector and some lawmakers are wondering why not.
Over the past seven months, politicians from the opposition parties and even the ruling People’s Action Party have asked the government for more details on whether the surge in wealth will affect the income gap.
They’ve queried to what extent rich immigrants have been investing in local businesses and what impact Chinese non-residents have had on property prices and rents.
Singapore increased luxury taxes amid a surge in prices for high-end property and cars to reap more from the rich without driving them offshore.
The Economic Development Board (EDB) said that 24,699 jobs were created in a range of roles, including software engineers, researchers and public relations, between 2011 and 2022.
Family offices also generate jobs indirectly through external finance, tax and legal professionals, according to the EDB.
Singapore also changed the conditions for family offices seeking tax exemptions a year ago, introducing higher minimum asset management standards and local investment requirements.
Just last month, it ramped up employment and investment thresholds for applicants to its Global Investor Programme.
That’s a pathway to citizenship for people so rich that the application itself – with no guarantee of success – requires that US$10,000 (RM44,200) be wired to a government account at Deutsche Bank.
Around 200 applicants have been granted permanent residency through the programme in the three years through 2022. — The Straits Times/ANN
