SINGAPORE — Ultra-wealthy Chinese entrepreneurs moving to Singapore have driven up prices, but have not been investing in local capital markets.
According to a report by Bloomberg, despite spending lavishly on mansions, luxury cars, and golf club memberships, few meetings with Chinese tycoons have resulted in business beyond basic custodian deals, according to hedge funds, banks, and private equity firms.
Family office assets at Singapore’s banks are on the rise, but money managers say 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 quoted by Bloomberg cite two main reasons for the reluctance: the tiny capital markets in Singapore and Southeast Asia, and the time needed for tycoons to feel comfortable with advisers they barely know.
According to Emmanuel Pitsilis, co-head of Asia-Pacific at Partners Capital Investment Group, investors “are not coming with a bunch of cash in suitcases.”
Furthermore, the local bourses lack the liquidity and high-profile names on the scale of New York and Hong Kong, while private equity and venture capital across the greater Southeast Asian region remain relatively small compared with China and Silicon Valley.
The limited investment is surprising, given there is plenty of evidence that Chinese tycoons are setting up bases and spending loads of money on other things.
The Monetary Authority of Singapore estimated there were about 700 family offices at the end of 2021. Industry experts say the current estimate is more like 1,400, with mainland Chinese the biggest drivers of growth.
The backlog alone of single-family offices applying for tax incentives and pending approvals is around 200, according to Senior Minister Tharman Shanmugaratnam in response to a question filed by Workers’ Party Louis Chua in March.
The presence of recent Chinese arrivals is keenly felt in Singapore, with some relocating to luxury homes with waterfront views on Sentosa Island, which also houses a theme park, a casino and a prestigious golf club.
The price of golf memberships for expats at the exclusive Sentosa Golf Club surged last year to S$840,000 as more Chinese join.
The nation’s real estate market has defied a global slump as newcomers snap up luxury condos, driving prices higher for 12 straight quarters.
High-end residential rents in the fourth quarter of 2022 were up 28% compared with a year earlier.
Retail sales surged almost 13% in February, while license fees for cars are hitting fresh records of S$118,990.
While the influx of Chinese money has not done as much for the financial services sector, 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, what rich immigrants have been investing in locally, and what impact Chinese non-residents have had on property prices and rents.
The Economic Development Board said that 24,699 jobs were created between 2011 and 2022, in a range of roles including software engineers, researchers, and public relations. Family offices also generate jobs indirectly through external finance, tax, and legal professionals, according to a spokesperson for the development agency.
Singapore 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.
Each investor is required to pay a non-refundable application fee of S$10,000 before submitting the application for Singapore Permanent Residence (PR) under the GIP. Around 200 applicants have been granted permanent residency through the programme in the three years through 2022.
Over time, the effort of starting family offices, moving relatives to Singapore, and living in the country will spark more local investments, said Crossinvest (Asia) chief operating officer Lucy W Gao-Azak to Bloomberg, whose firm also helps single-family clients establish their own operations. But she warns it won’t be the tsunami some had hoped for.
“It’ll never be the home market for Chinese investors, and they’ll always invest in what they’re familiar with,” she said. “Investors will rarely sacrifice and compromise performance of returns for any regional bias.”