In 2017, I flew to Riyadh for the first time ever to attend the Future Investment Initiative (FII) conference. This was Saudi Arabia’s largest and first ever nation-wide event orchestrated to bring in the largest and wealthiest investors, businessmen and celebrities from all over the world. Obviously a large budget had been set aside to fund these events, in exchange for sovereign publicity or to bring in foreign investment. Held at the Four Seasons, the whole thing was so high profile that it was dubbed “Davos in the desert” by the media.
Many governments have their own versions of the FII - the APEC summit, Boao Forum, Saint Petersburg as well as other relatively smaller but similarly symbolic events hosted by relatively high profile media and organizations including the Forbes, Fortune, etc.
In addition to rubbing shoulders with the who's who in the upper echelons of the business world., the people who travelled to these places often associate strategic importance with the cities that hosted these MICE events.
Hong Kong was always known to be the top MICE destination for such events. Accessibility was one of the biggest draws. No one needs to plan ahead to be in Hong Kong. There are basically at least a hundred flights in and out from the city every day. The 20-minute commute from the airport to the city centre means that one can fly in the morning and get out by night. Besides, there was always something to do in town: Cultural festivals, concerts, business conferences, food and the shopping.
And there would always be investors to meet and friends to catch up with. All you have to do is book your tickets and go. Almost every company with a meaningful global presence in Asia has an outpost in Hong Kong. At one point of time the city was even leading the charge in convening the "most brilliant minds in international tech" via the RISE conference - a must-go for any technology company with a serious interest in Asia.
But there is less reason to get into Hong Kong today.
Aside from the fact that many companies and conferences have shifted away, a string of covid testing procedures awaits upon arrival at the airport. Travelling into Hong Kong today has become a meticulously curated trip.
Despite the recent inaugural policy address by the new chief executive in Hong Kong to reclaim the city’s historic position as a premier financial center and to step up talent acquisition and retention, people seemed to have somewhat lost confidence in what the future holds for the city.
To stem the further outflow of companies and talent, the government had also in recent months very publicly unveiled a high-level banking summit to host the titans of finance back in its city center. Yet inbound quarantine measures and restrictive health monitoring continue to weigh on travel.
Unlike the FII in Riyadh, never in my wildest imagination, did I expect a city like Hong Kong to have to host a large summit in order to convince high profile bankers, businessmen and investors to come to its shores.
If you wanted to raise capital in Asia, Hong Kong was definitely one of the cities you had to stop by. No questions asked. During the "peak season" of investor roadshows and conferences, it was even common to bump into some of the bigwigs when you were in town (I remembered sharing the same lift with David Rubenstein once in HK at a conference).
The reality that Hong Kong now has to go out at length to advertise a high profile banker summit reveals how much its economic environment has deteriorated over the last few years.
Aside from the exodus of companies and talent, the debt and equities market has basically also dried up.
Companies that wanted the largest and most jumbo offerings almost always came to the HKEx because of the size, depth of liquidity and diverse pools of capital. People go to Hong Kong for the riches - and it was not uncommon to find multi-bagger companies listed on the Hong Kong Exchange as compared to Singapore, which in my view, the latter is more suited for those who seek stable returns and the preservation of wealth.
In order to justify and maintain its leading role as an IPO destination for Asia, the Hong Kong exchange had also initiated waiving revenue requirement for tech IPOs in an effort to revive the IPO market.
Singapore is quite the classic example of how efforts in positioning itself as a listing hub has proved relatively futile. Its tie-up with NASDAQ and Tel Aviv has been questionable - none of which has produced any signficant tangible results. Even, the newly launched SPAC framework, which was probably meant to be an avenue for VCs and early tech investors to cash out, has yet to see outstanding results with only three listings to date. Part of this was probably also due to bad market timing.
Hong Kong has enjoyed much success in priding itself as the go-to Asia Pacific regional hub for business and equities market over Singapore largely attributed to China. It is undeniable that China played a part in creating the huge ecosystem of listed companies. The sheer size of the market breeds liquidity, which drives more brokerage and trading activity, more research coverage, more investor awareness, drawing in more capital for companies. Globalization (i.e. China opening up its doors) also played a big role in that process.
As such, Hong Kong didn't really need to sell itself as a prime destination or lower its standards in order to attract the influx of capital and large companies. Maybe not until recently.
But once we start to compromise on quality and start doing things like waiving revenue requirements for tech IPOs, things can start to get dangerous. And if not careful, this shift could end up being permanent and structural.
In the last couple of years, Hong Kong had remained relatively “closed” to the rest of the world. I think the city is bearing the brunt, both on the psychological and commercial front from reduced travel. Basically no one was making plans to get in, unless it was for business. This was favourable from the perspective of a traveller as accommodation prices, once considered to be incredibly high for Hong Kong had plummeted significantly.
And so I had never given much consideration towards the amount of rent paid only until recently.
As most of the world opens up, the return of overseas travel has increasingly led to higher airfares and hotel rates. When I returned to Hong Kong this year, I discovered that the lease on my place had gone up by about 30%. Last year had been a tough period for Hong Kong - 14-day quarantines, tourist inflows from China taking a hit, businesses and residents relocating among other things. So this year, with the anticipation of opening up to the world mounting, I foresee that prices will continue to increase into next year.
When I graduated from university, I was one of the lucky ones who did not have to worry about paying rent or having a roof over my head. After amassing enough savings over 3 to 4 years, I made that decision to buy an apartment rather than renting one. Renting had never really been an option for me, maybe because being a resident in my own country, home ownership was the de facto scenario. Or so it was until I moved to Hong Kong last year.
Owning a place and servicing the mortgage payments work pretty much in the same way as rent with a few main differences.
Both rent and mortgage service are cash expenses. But the action of paying the mortgage every month is different from rent: With mortgage, one takes comfort in home ownership, knowing that your equity position generally improves with every month of debt service (assuming of course the value of your home doesn’t decline), which based on consensus: property is always supposed to be a good store of value. With rent, it’s basically a one way street as a sunk expense with no returns. Buying a property is definitely more cash intensive due to the upfront costs but that is inherently seen as an investment.
Also, the “step-up” in rents can be merciless as compared to mortgages, which arguably at this point of writing, interest rates for home loans have reached a cyclical high. Putting interest rates aside, rents remain much more highly sensitive to short term spikes in supply and demand, while mortgage payments are largely based on the amount you borrow and your declared income upon taking on the loan.
It can also be very difficult to call a rented place home, especially if you do not have any long term visibility of staying in that city. This ’temporary’ or immigrant mindset creates a lot of uncertainty and inertia for doing any ‘upgrades’ to improve your living condition.
To an immigrant, the bottom line is everything. The less I pay in rent, the more I bring home in cash.
While I consider myself middle-class and one of the more fortunate and relatively better-placed immigrants, I can totally feel what it is like to be an outsider alone in a foreign country earning a living, setting aside as much as possible every month with the end goal of going home one day.
The last couple of weeks have been incredibly exciting for Singapore: SuperReturn Asia, DealStreetAsia's PE/VC event, the Milken Asia Summit, Forbes CEO conference and the F1. Visitors getting into Singapore today are neither required to serve any quarantine nor wear masks in public. Everything feels like it's been reverted back to 2019 - big MICE events, face-to-face meetings, public gatherings, etc. It almost feels surreal.
Except that I am not in Singapore.
Envious onlookers residing in Hong Kong can only drool at the party from afar and read about these large-scale social events in the news and LinkedIn feeds.
Last week, Hong Kong finally announced that it was lifting mandatory quarantine for arrivals into the city. From the 14-day quarantine implemented last year to 7 days and recently to 3+4, inbound travelers now simply need to do 0+3 i.e. no quarantine but just a 3-day monitoring period (still better than serving quarantine in China). It was a long awaited step, but some have said this was too little too late.
Against the backdrop of an increasing number of people and firms moving from HK to Singapore, and the recent high-level summits taking place over the last couple of weeks, I guess HK is finally saying "enough is enough and we have to get back in the game or run the risk of really losing out in the long term."
It seems like Singapore has played its cards well and somehow "gotten ahead of the game".
"Singapore may have the edge at the moment, but Hong Kong has more longer-term advantages to attract capital and talent" - HKEX
Despite the COVID restrictions, the relatively high costs of housing, stilfing space and population exodus, there is some truth in HK being better positioned than Singapore in terms of leveraging the resources of Asia's largest economy - China. Besides, conference go-ers are generally indifferent to where the party is held as long as they are invited and there is reasonable certainty of a huge turnout.
Understandably, those sitting on either side are motivated to swing the odds back into their favour.
I am not trying to pre-empt whether or not the tables will eventually turn for both cities but recall back in 2020 at the onset of the pandemic, Hong Kong was at one point of time leading the charge on potentially emerging from the abyss.
And then in a twist of events, it was tightened again in late 2020 due to the resurgence of the 'second wave'.
When the dust finally settled in early-mid 2021, I vividly recalled HK was gradually moving back to larger group gatherings and reinstating back-to-the-office work.
Over that same period, Singapore on the other hand was back-tracking.
I had been preparing to depart Singapore in May, looking forward to getting some reprieve that at least face-to-face meetings were possible in Hong Kong.
Singapore didn't make any significant headway in lifting the restrictions until later that same year. And then in 2022 after the spring break, HK again went into partial shutdown for over a month.
Look, you might be wondering what is the point behind all of these.
If there was anything I learned over the last 2 years from the pandemic, it is that nothing is ever really permanent.
The stable state of things we are familiar with can be easily contested at some point of time or another.
We took public gatherings for granted until COVID happened. Singaporeans took for granted chicken rice, a somewhat common staple would always be there until Malaysia halted the exports of Chicken for awhile in May 2022.
The same way energy stability in Europe have always been considered a given until they were forced to take sides amidst the Russia-Ukraine war. Even the economies that were halfway around the globe probably didn't expect their food supply chain to be disrupted by a territorial conflict involving one of the world's largest exporter of grains.
Things can change in an instant.
In 2021 when I thought Hong Kong had finally sorted COVID out and Singapore was still lagging far behind in terms of getting infection numbers under control, look how one year has totally reversed the state of things when Hong Kong became the unfortuate victim of the Omicron resurgence in February 2022.
Just like the conference go-ers, the companies and workers that have relocated to Singapore can easily find themselves moving back to Hong Kong very quickly once normality has been restored.
Change is the only constant and the race is long. Sometimes you are in front and sometimes you are behind.
All things - no matter how good or bad they may seem to be today - can change very quickly.