Singapore to woo more banks
City state plans to maintain lead over HK as biggest forex hub in Asia
SINGAPORE: Singapore saw its lead over Hong Kong shrink to just a whisker in the battle to be Asia’s biggest foreign-exchange (FX) currency hub. To keep its advantage, the island state wants to attract more companies to set up electronic trading platforms.
Average daily trading in Singapore jumped 22% to a record Us$633bil in April from the same period in 2016, according to the latest survey by the Bank for International Settlements (BIS).
That’s just ahead of Hong Kong’s Us$632bil, as the Chinese city saw a 45% surge in daily transactions.
Singapore has enticed UBS Group AG, Citigroup Inc, Standard Chartered Plc and Jpmorgan Chase & Co in the past year to set up FX pricing and trading engines so that investors can reduce the time lag from routing trades elsewhere.
That’s helped it take market share from Japan, while competing against Hong Kong that’s at the forefront of the yuan market.
The South-east Asian nation will need three to five more major players to build electronic trading platforms to achieve “critical mass” over the next year, according to Benny Chey, assistant managing director of development and international at the Monetary Authority of Singapore (MAS).
“We have confidence that we’ll get those players as we’re already in discussions with them,” Chey said in an interview, without disclosing their identities.
“Growth of trading in Asian and other emerging-market currencies will be an increasingly important market driver for Singapore.”
The latest data from BIS showing a neck-toneck race between the two rival financial centres also reflected a surge in trading of the Hong Kong dollar that month as bears were squeezed when borrowing costs suddenly advanced.
“The increases in FX turnover were mainly due to hedging and arbitrage trades of clients, as well as increased hedging and funding needs of financial institutions,” the Hong Kong Monetary Authority said in an emailed response to questions.
“The 2019 BIS survey results reaffirmed Hong Kong’s status as a major international financial centre.”
BIS data showed that Japan’s share of global FX trading in April dropped to 4.5% from 6.1% in 2016. Sales desks from five locations – the United Kingdom, United States, Singapore, Hong Kong and Japan – intermediated 79% of the world’s total daily currency trading. The increase in FX trading in Singapore was broad based, with growth seen in Groupof-10 currencies and emerging-market ones such as the South African rand and Mexican peso. The US dollar, yen, euro, and the Australian and Singapore dollars were the most-traded currencies in the island state, the data showed.
Singapore has been offering tax incentives and government grants to boost trading. Family offices are also a focus for Singapore’s central bank, according to MAS’ Chey.
“The wealth accumulation and need to transfer wealth from one generation to another will help growth,” he said.
The number of Asian billionaires will rise by 27% to 1,003 between 2018 and 2023, making up more than a third of the world’s total billionaire population, according to a March report by Knight Frank LLP.