Although the US dollar’s free fall might have stopped for now, US President Donald Trump’s trade war has left many analysts skeptical of its long-term viability as a haven. The first question in Asia is, how will the wealthy respond? The second: Where will they park their capital, Singapore or Hong Kong?
A previous generation of the affluent Chinese diaspora, which had made its money in resources like rubber, sugar, palm oil, and tin before and during World War II, stormed out of the pound after its 1967 devaluation, choosing to leave behind a fading imperial master to embrace the preeminent post-colonial superpower.
Trump’s policies have thrust a similar decision on their progeny and the nouveau rich: real-estate moguls, start-up billionaires, deep-pocketed dealmakers and industrial tycoons.
Singapore and Hong Kong extend generous tax breaks to family offices, or vehicles through which the uber-prosperous manage their investments. Both centers also offer cash-for-residency pathways.
To see which one of them might have an upper hand, first consider the historical record before taking into account what is different now.
In 1968, Singapore emerged as the No. 1 choice for Asian tycoons to execute their currency shift. That is because the city-state, eager to chart an independent economic destiny after its separation from Malaysia, quickly set up an Asian dollar market with the help of Dick van Oenen, a Dutch trader at Bank of America.
It was essentially a separate set of ledgers in which banks recorded cross-border transfers into dollar-denominated assets during Asian trading hours. A more laissez-faire Hong Kong should have been the preferred venue for this business, but as Oxford historian Catherine Schenk has shown, it entered the contest too late because of resistance from bankers and local authorities; they feared outflows of local liquidity.
The Singapore market grew with the influx of petrodollars in the 1970s. Even now, despite the huge wealth creation at Hong Kong’s doorstep since China began to open up, the intra-Asian movement of personal assets remains almost equally divided between the two financial centers.
Expect some of the inertia to carry on: Indian family offices’ list of preferred locations would more likely continue to include Singapore, alongside London and Dubai — all cities with significant populations of nonresident Indians.
However, Hong Kong would offer a compelling investment case. Should the trade war intensify, and US-listed Chinese stocks such as Alibaba Group Holding Ltd (阿里巴巴) and Baidu Inc (百度) are forced to delist, the only way to access them — as well as automotive powerhouses such as BYD Co (比亞迪) and promising AI start-ups like Zhipu (智譜) — might be via Hong Kong and its links with onshore markets in China.
For similar reasons, Indonesian money, which has tended to favor Singapore over Hong Kong by two to one, might also look more favorably toward the Chinese special administrative region.
The yuan’s limited convertibility is a hurdle, and the possibility of its devaluation is a near-term risk, but these are not showstoppers in the long run.
In addition, the greenback’s monopoly in payments is already threatened. Digital currencies might be able to bypass the dollar to settle cross-border financial claims where neither party has a direct interest in US money.
Hong Kong, which has opened its securities-regulation tent to accommodate tokenized assets, might be able to lure the rich to keep their crypto in custody with the city’s banks.
Trump’s trade policies, even if substantially reversed, have sent a loud message to the Asian affluent classes. For all its post-World War II prosperity, the US is no longer keen to continue with a system in which it habitually buys more goods from the rest of the world than it sells, and pays for the difference by hawking assets. If Washington does not want its money to be a haven, then Asians have to look for alternatives.
Despite the recent bounce, bearish dollar moves are “structural,” Bloomberg Intelligence said. “Highly uncertain tariff policies and the associated question marks hovering around US economic exceptionalism are contributing to an acceleration of de-dollarization,” Bloomberg Intelligence analysts Audrey Childe-Freeman and Thinh Nguyen said.
A corollary for Hong Kong as a financial center is that it would need to give plenty of yuan-denominated options to those parking their assets in the city. A deep pool of liquidity in the Chinese currency would be its advantage over Singapore.
It might also be time, as my colleague Shuli Ren has argued, to start behind-the-scenes preparations to bring an orderly end to the local currency’s dollar peg. In the late 1960s, the then British-run city was slow to latch on to the switch away from the pound; six decades later, the greenback should not come in the way of its fight for flows.
Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services in Asia. Previously, he worked for Reuters, the Straits Times and Bloomberg News. This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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