Singapore virtual banking auction may add to Hong Kong’s woes

Short video app TikTok’s parent ByteDance is considering joining forces with Singapore’s influential Lee business family to bid for one of the five virtual banking licences that the sovereign island city-state is set to issue by the end of the year. Although the move is not directly related to the uncertainty now casting a shadow over Hong Kong’s future,  it raises the possibility that Singapore may increasingly come to be seen as an alternative financial centre of choice to Hong Kong in South East Asia.
Bytedance’s roots are firmly in the technology sector but, like many other major Chinese high-tech companies, it has recently been assessing fintech’s potential to disrupt the banking sector. Along with Alibaba’s Ant Financial and the smartphone maker Xiaomi, it has now decided to compete for one of the new licences being put up for tender by the Monetary Authority of Singapore.
Founded by Zhang Yiming in 2012, ByteDance’s core product is the Toutiao content platform and the holding company currently has a market valuation of approximately $75bn.  Despite this financial muscle, it has evidently calculated that entering into a partnership with one of Singapore’s best-known corporate families will strengthen its chances of winning one of those licences; the clan’s late patriarch Lee Kong Chian was founding father of south-east Asia’s second-largest financial institution the OCBC bank which remains a major source of the Lee family wealth to this day. The Lees also have significant ties to the Singapore government. Although ByteDance  previously considered applying for a virtual banking licence in Hong Kong, it is now said to view Singapore as a better base from which to use its technology to put that disruption into practice.
US Secretary of State Mike Pompeo lands in IsraelThat may prove to be an even wiser judgement call now that Beijing has signalled its approveal for a new security law. Ostensibly aimed at ‘suppressing secessionist and subversive activity’ in the former British colony, the move has prompted US Secretary of State and Trump attack dog Mike Pompeo to say that the US administration may no longer treat Hong Kong as autonomous from Beijing, leading to fears that Washington could revoke its promise to exchange Hong Kong for US dollars. This could potentially disrupt the city’s financial system, according to Deutsche Bank economist Michael Spencer, and the financial sector could take a big hit if companies such as MSCI were to reclassify Hong Kong as an emerging market like Shenzhen and Shanghai instead of a developed market – like Singapore, for example. This in turn would almost certainly undermine Hong Kong’s status as one of the world’s friendliest business environments and jeopardise its fourth-place position in the World Economic Forum’s Doing Business 2019 Business report that it earned on the back of a combination of a skilled workforce, business-friendly legal system, Western-style free speech and ease of movement. “A very large share of capital invested in the Hong Kong market will have to leave,” Spencer predicts.
William Reinsch, senior adviser at the Center for Strategic and International Studies agrees. “Over time, people get nervous, and think ‘…. my money may not be, as safe as it once was, and I”m going to think about going somewhere else’. It sends a signal that Hong Kong is no longer a safe and reliable place to put your money or to do business.” Back in Singapore, meanwhile, the authorities are now on track to lift more restrictions on companies and residents by the end of June, and expects practically the entire economy to open up by then. “With the start of phase two, we expect virtually the entire economy to be reopened — shops, finance and banking, F&B [Food & Beverages] dining, social interactions, but there will be limits on the number of people who can get together,” Lawrence Wong, minister for national development, told Bloomberg TV.