Thousands of Hong Kong’s wealthy residents are opening bank accounts in Singapore and other financial centres, as they make contingency plans to protect themselves against a prolonged period of unrest in the territory.
UBS, HSBC, Pictet and Credit Suisse are among the banks to have had a sharp increase in Hong Kong customers opening overseas accounts, according to people familiar with the matter. The trend has accelerated as the mass protests over Beijing’s threat to Hong Kong’s independence continue for a fourth month, they say.
One European bank has seen a rise in account openings, but less than 1 per cent of deposits held by its Hong Kong customers have actually moved, according to an executive briefed on the matter. “Hong Kong’s loss is Asean’s gain,” they said.
Another executive said they had told Carrie Lam, Hong Kong’s chief executive, about the trend, warning that the financial hub risked seeing capital flight if the stand-off between the protesters and the Beijing-backed local government was not resolved soon. However, they said little cash had actually left, with wealthy clients positioning themselves for the worst.
Meanwhile, an executive at a Singaporean bank with operations in Hong Kong said more accounts have been opened in the last three months than ever before, with the bulk being medium-sized accounts which typically range from S$1 to S$2m.
Sparked by the introduction in June of a bill that would have allowed suspects to be extradited to mainland China for the first time, the protests have thrown Hong Kong’s future into doubt just as the US-China trade war saps its economy.
In August, retail sales fell by a record amount for a single month, while visitors to the city plunged 40 per cent. Earlier this week, the IMF slashed its 2019 growth forecast for the territory to 0.3 per cent, down from a 2.7 per cent projection made in April.
Ms Lam said on Wednesday that Hong Kong had entered a ‘technical recession,’ as pro-democracy protesters forced her annual policy speech to be suspended.
Losing the money and confidence of some of its richest residents, as well as the upper echelons of the middle class, would exacerbate the downturn and threaten its position as Asia’s premier financial centre.
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“European cities had been losing ground to Hong Kong for years, but that situation is reversing now,” one bank executive told the FT. “There is now a lot of interest in shifting money out of Hong Kong.”
“We are just at the first stages, people are enquiring and . . . [some] are opening accounts in Singapore, but not moving their cash just yet,” they added. “Also, London and Switzerland are not looking such bad places to move money, despite Brexit, considering all the Asia turmoil at the margins.”
The executive at the Singaporean bank said that three months ago it was receiving about 80 applications a month to open accounts from a variety of clients, from the lower end up to private banking level. But the number of applications has skyrocketed, driven mainly by Hong Kong-based clients looking to hedge themselves against an intensification of the unrest, they said.
In August, the bank received 400 applications to open accounts, taking the total this year to about 600. So far, about 75 to 80 per cent of applications have translated into account openings, given that the bank needs to complete know-your-customer and due diligence procedures, the executive said.
Only a few Hong Kong clients — many of whom already had a relationship with the bank — have transferred money into these new Singapore accounts since protests kicked off, for a total of about S$300-400m, the banker said.
Private banking clients do not account for the bulk of these new openings given that they tend to already have a network of accounts with different banking institutions, the executive said.
Spokespeople for the four banks declined to comment.
Foreign banks, eager to make inroads into China’s fast-growing economy, have had to tread carefully when dealing with its authorities. UBS was forced to suspend one of its senior economists over the summer when he made remarks relating to a bout of swine fever in China that were interpreted as insulting. He has since been reinstated and returned to work.
Additional reporting by George Hammond in Hong Kong