Battle that may not be worth the sacrifices
Singapore has launched another campaign to make itself the financial hub of Asia and clearly aims to attract Hong Kong's financial services industries as well as take more business from Tokyo.
The measures include merging the stock exchange and the Singapore International Monetary Exchange (Simex), opening seats on them to anyone who meets standard requirements and letting the market determine commissions.
Should we be quaking in our boots in Hong Kong at this new threat to steal business from us? The question is an obvious one but in some ways it overrates the threat.
Singapore's economy is heavily geared towards international high finance but we make our money in services primarily from a more down to earth business of trade and investment in the mainland.
With just a few buoyant trading sessions behind them, the red chips listed in Hong Kong have already announced plans in one day alone to raise $1.6 billion of new money from the market. There is easily enough happening in the mainland to keep us busy.
Even so, Hong Kong people have a natural inclination to keep other financial industries if only a little effort will stop them from going to Singapore. Already Singapore has established primacy in foreign exchange dealing, oil futures and gold trading while regional fund management firms are sorely attracted by Singapore's amenities, tax breaks and other incentives.
But it is not quite so easy for Singapore as it may first appear. It is a small place after all and has only tiny domestic financial markets on which to base a financial services industry. Even these are mostly excluded to the financiers it wishes to attract.
The business therefore has to be almost entirely international and the only way to attract it away from other countries is to make it easier to deal in Singapore than at home. A good example of this is the success of the Japanese business done on Simex.
Several things will make it more difficult to repeat this success, however. The first is that financial markets are increasingly made on telephones. You don't need close physical proximity to your dealing counterparts if you have cyberspace available. The rising mobility of financial markets brought many of them to Singapore but it is also turning their physical locations into little more than low-cost booking centres.
The second is that financial authorities in Asian countries are increasingly taking steps to stop poaching. Singapore has, for instance, already lost a lucrative business in Malaysian shares by Malaysian Government orders and now the Hong Kong stock exchange is threatening to cut off data providers if they supply data for a proposed Hong Kong futures contract in Singapore.
The third is that other countries are not standing still. The economic slowdown in Asia has slowed liberalisation of financial markets but has not stopped it. As liberalisation resumes Singapore will find it more difficult to maintain its edge in ease of dealing.
And what will it do then? Simex already took a blow to its reputation when Barings crashed through dealings conducted on the Simex floor. There is a limit to the convenience any financial centre can offer without running the risk of being lumped in with Vancouver as a gunslinger's market.
It may seem like a winner for Singapore but in the end it's a losing game in the modern financial world to create domestic markets based entirely on other people's economies and then cross your fingers that you won't annoy them into making a few changes that will take the trading away from you again. All this assumes that the telephone won't take it away from you in the first place.
Sing-a-la-las have something of a complex about their competitive standing against what they call 'Hongkies' and it seems to trouble them more than it does us. Their latest run at Hong Kong's markets won't change things much. Let's not make it easy for them but let's also not sacrifice too much to stop them.
