Hong Kong and Singapore, two prominent city-state economies in Asia, have often been subject to comparison. While Hong Kong has historically been recognized as a regional international financial hub, Singapore functions as a key international financial center within the ASEAN region. Prior to 2019, Hong Kong held a superior status as an international financial center compared to Singapore, boasting a larger capital market and offering more comprehensive financial services.
However, significant shifts have occurred since 2019. The year saw Hong Kong grappling with nearly a year of social unrest, which significantly tarnished its reputation as a free and secure international financial hub. Subsequently, the onset of the COVID-19 pandemic in 2020, coupled with the escalating anti-globalization wave and geopolitical conflicts, further exacerbated Hong Kong’s challenges. As a result, over the past five years, the trajectories of development for Hong Kong and Singapore have diverged, with Hong Kong experiencing a decline while Singapore’s prominence has risen.
As a pivotal international financial hub, Hong Kong’s prosperity is closely linked to its proximity to mainland China. However, its economic success has largely depended on Western markets. Serving as a crucial link between mainland China and the global economy, Hong Kong operates under a linked exchange rate system with free capital movement. Despite its status as a city-state with a capitalist market economy, Hong Kong benefits from special tariff policies offered by the West and attracts numerous multinational corporations.
The escalation of the U.S.-China geopolitical competitions brought significant changes to Hong Kong’s development landscape. The U.S. revoked Hong Kong’s special tariff status and imposed a series of restrictions, altering the city’s status as an international financial hub. Consequently, a number of Western multinationals withdrew, international capital flowed out, and wealthy individuals moved assets to Singapore due to geopolitical risks. This resulted in stagnation in local economic and financial activities.
Singapore emerged as a major beneficiary of these shifts from Hong Kong. With its “small country, big diplomacy” strategy, Singapore, though politically authoritarian, offers economic liberalization. It has become an attractive destination for capital from the Greater China region seeking relocation. As a result, many wealthy individuals from Mainland China have chosen to immigrate to Singapore in recent years, contributing to the decline of Hong Kong and the rise of Singapore.
Yet, Hong Kong still has substantial advantages over Singapore. In 2023, the Hong Kong Stock Exchange (HKEX) fell to eighth place globally in IPO fundraising, with only 70 new listings and a total fundraising amount of about USD 6 billion, causing concern about the future of the Hong Kong stock market. However, comparisons highlight the situation: in Singapore, considered a rival to Hong Kong, the Singapore Exchange (SGX) had only 7 new listings in 2023, with a total fundraising amount of just USD 300 million, only one-tenth and one-twentieth of Hong Kong’s figures, respectively. More surprisingly, the SGX saw over 20 de-listings last year, reducing the number of listed com panies from 651 at the end of 2022 to 632 by the end of 2023. As of the end of March this year, the latest number of listed companies in Singapore is 624, indicating that the “shrinkage trend” continues.
In addition to the number of companies, the gap between the two becomes even more apparent when comparing the total market capitalization of listed companies. Currently, the total market capitalization of the Singapore stock market is approximately USD 735.1 billion (about HKD 5.7 trillion), whereas the total market capitalization of Hong Kong stocks is as high as HKD 33.4 trillion. Just the combined market value of three heavyweight stocks, i.e., Tencent, Alibaba, and China Mobile amounts to HKD 6.6 trillion, exceeding the entire market capitalization of the Singapore stock market. In terms of liquidity, the average daily turnover on the SGX in March was USD 1.19 billion (about HKD 9.3 billion), while the HKEX had an average daily turnover of HKD 112.3 billion during the same period, more than ten times that of SGX.
Singapore’s stock market faces inherent challenges due to its limited territory, market space, and lack of strong support, like the support provided by Mainland China to Hong Kong. Furthermore, it struggles to attract a sufficient number of large companies for listings. Its economy heavily relies on international markets, making it vulnerable to geopolitical risks and regional turmoil. In contrast, Hong Kong enjoys advantages in these aspects. Therefore, if Hong Kong can withstand current challenges and await a more balanced phase of globalization, there is a significant chance for its return to prosperity. While Hong Kong’s future may differ from its past, achieving renewed prosperity would still be considered a success.
