(guns firing)
- [Erin] After a long summer of protests in Hong Kong,
credit rating agency Moody's
changed its outlook for the city to negative.
Banks, hedge funds and other financial specialists
may now consider life outside Hong Kong,
a place known for its liberal economy
and direct access to China.
So where could they go?
Singapore, Tokyo and Shanghai are possible options.
In March, the three financial hubs
were just behind Hong Kong
in a ranking of the competitiveness
of more than 100 financial centers.
So could these cities get more of Hong Kong's business?
Singapore has a lot of the same qualities
that make Hong Kong attractive.
The city state has rule of law and an attractive tax system
and just like Hong Kong,
it has the ubiquitous use of English.
It's also a major center for wealth management
but Hong Kong has one really big advantage.
It's a gateway to China.
- Hong Kong is part of China,
but it has its own special legal and regulatory system.
Singapore of course,
has got a lot of cultural affinities with China,
and there's a big Chinese diaspora there
but of course it's a separate country
and I don't think for Chinese companies
and for Chinese officials, it's quite the same thing
to list a business in Singapore
as it is to list it right next door in Hong Kong.
- [Erin] As a result, Singapore's stock market
has always been smaller than Hong Kong's.
- Very roughly, the Singapore market
is about a quarter the size of the Hong Kong market
in terms of the capitalization.
- [Erin] In September, when the Hong Kong Exchange
made a surprise take over proposal
to the London Stock Exchange,
the LSE's board rejected the order
and said it actually preferred Shanghai
as a direct channel to access China.
Shanghai already serves as mainland China's
most advanced financial hub,
including bond and stock markets capitalized
at trillions of dollars.
Its exchange is already larger than Hong Kong's
and it is forecast to grow much further
in the coming decades,
but being in China can also be seen as a disadvantage.
- China still operates capital control
so you can't take money in
and out of the country very easily,
given that there's quite a complicated
and opaque legal system,
and so often companies feel that they're operating
in an unfair system.
- [Erin] For years,
the government has been liberalizing the financial sector
to attract foreign institutions and their money.
(speaks Chinese)
But the bureaucracy so far has hindered Shanghai's ambition
as a truly global financial center.
Tokyo is the capital of the world's third largest economy.
It is a place where companies enjoy the rule of law
and which boasts deep markets.
The city has more Fortune 500 companies than anywhere else
and in late August--
- [News Announcer] Aramco might list in Tokyo.
- [Erin] The city made big news
with a Saudi Arabian oil giant.
- The Japanese authorities might be comfortable
with a slightly lower level of disclosure
about things like reserves for example,
which might make it easier for Aramco,
which is a very politically sensitive company
to list in Tokyo.
If Tokyo won a listing of Aramco,
that would be a really big feather in the cap
of that stock market.
- [Erin] But there are factors holding Tokyo back.
Taxes are higher than in Hong Kong or Singapore.
Tokyo also has stricter VISA requirements.
It's also a less cosmopolitan place.
Language is a big barrier;
it can be difficult for companies to find employees
who have a good command of English.
The country was rated 32nd in latest HSBC list
of top expat destinations,
way behind even mainland China.
Many financiers say that Hong Kong
is still the only city in Asia
to offer the combination of the rule of law,
an open capital account
and a convenient base for jumping into the Chinese market,
yet the long months of protests are already taking a toll.
Chinese E-commerce giant Alibaba recently put
a blockbuster listing there on hold for instance.
Hong Kong is scheduled to keep its special status
as a semi-autonomous region until 2047,
but as Beijing's grip on the territory increases
so does uncertainty about what might happen
in the near future.
(upbeat music)