S'pore Becoming A Magnet For The World's Wealthy

Source : The Business Times, December 19, 2007

Non-residents' deposits rise, fuelled by strong S$, private banking drive

As wealth from across the globe seeks new homes, a growing chunk is finding its way to Singapore. In fact, more rich people who live elsewhere have decided to let their money reside in the Republic.

According to the Monetary Authority of Singapore, deposits by non-residents grew 46 per cent to almost $30 billion at end-October from a year ago. This is almost three times the $10.6 billion parked here in 2002.

Singapore's strong fundamentals and its growing reputation as a private banking hub have obviously proved to be a strong magnet. Most of the money - $20.4 billion - is in longer-term fixed deposits. The rest is in short-term demand deposits and savings and other deposits.

Domestic resident deposits were up a more sedate 20 per cent at $232 billion in October.

Bankers and economists say that Singapore's efforts to be a private banking hub are paying off. Much of the money piling up here is from rich individuals in the region, the Middle East and even as far away as Russia, they say.

Standard Chartered Private Bank this year became the first international bank to make Singapore its global private banking headquarters.

More boutique private banks are also setting up shop here. Lombard Odier Darier Hentsch, a Geneva-based institution with a history going back more than 200 years will open a Singapore office next month. Its target clients are predominantly family entrepreneurs from Singapore, Malaysia, Indonesia, Brunei and Thailand.

'It shows that people are comfortable putting money in Singapore,' said Citigroup economist Chua Hak Bin. In addition, an explicit policy change towards steeper appreciation of the Singapore dollar has led many private bankers to recommend that clients hold more Sing dollars, he said. The forecast is for the Sing dollar to rise about 5 per cent against the US unit by the end of 2008.

'It has become a store of value, and it has helped that interest rates have not come off despite the Fed cuts,' Dr Chua said.

The US Federal Reserve this month cut interest rates. But interest rates globally, including Singapore, did not slide because of a continued liquidity squeeze in the credit markets.

Singapore's economic fundamentals, well-regulated markets and stable currency are also attractive for wealthy entrepreneurs.

Standard Chartered economist Alvin Liew believes much of the increase in non-resident deposits here is from the growing ranks of wealthy individuals and the level of wealth in the non-Western world, from Asia to Middle East to Eastern Europe.

Standard Chartered global head of private bank Peter Flavel said: 'From our research, the majority of wealth is in cash or near cash, and a lot of wealth created in Asia is relatively recent - first or second generation.'

Singapore's strong regulations, good infrastructure and government support for the wealth management business are magnets, he said. These factors, coupled with an attractive tax environment and a stable currency, have made it a top place to do business. Interest on non-resident funds deposited here is tax-exempt.

Some non-resident deposits could be parked here before the money is invested in property, though some is also used by those betting on the appreciation of the Chinese renminbi.

The Singapore unit is the best proxy for investors betting on renminbi appreciation, according to United Overseas Bank's head of economics and treasury research, Jimmy Koh.

'The Sing dollar has the least restrictions and is the most liquid currency in the region,' he said.