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Thread: Hong Kong is world's top financial centre

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    Default Hong Kong is world's top financial centre

    http://www.businesstimes.com.sg/sub/...79140,00.html?

    Published December 15, 2011

    Hong Kong is world's top financial centre

    It is first Asian city to be No1, pipping the US, UK, S'pore in the process

    By EMILYN YAP


    (SINGAPORE) Hong Kong has claimed pole position in a ranking of the world's financial systems this year, beating the United States, the United Kingdom, and close competitor Singapore with the help of strong initial public offering (IPO) and insurance activity.

    It is the first Asian financial centre to top the World Economic Forum's (WEF) Financial Development Index, leapfrogging traditional powerhouses from fourth place last year.

    The US, UK, and Singapore came in second, third, and fourth respectively, after dropping a notch each.

    'Hong Kong's ascent to the top of our index marks a major milestone,' said WEF USA chief operating officer Kevin Steinberg.

    'While Western financial centres are understandably focused on short-term challenges, this report should serve as a wake-up call that their long-term leadership may be in jeopardy.'

    The index ranks 60 economies based on factors such as financial sector liberalisation, business costs, financial stability, listing activity, and bond market development culled from various years, depending on data availability.

    A sharp improvement in activity in non-banking services such as IPOs and insurance boosted Hong Kong's overall score considerably.

    Between 2008 and 2010 for example, it beat all the other economies to attract the highest average amount of IPO proceeds.

    This helped Hong Kong overtake the US even though the latter's score was almost unchanged from last year's.

    While financial stability was still a concern for the US, it remained a strong financial intermediary with its advanced foreign exchange and derivatives markets. It also recorded robust merger and acquisition activity.

    Singapore's decline is a result of 'securitisation markets drying up and a weakening banking system', WEF said.

    For instance, Singapore had a small share of total securitisation deals between 2008 and 2010 involving instruments such as high- yield bonds, taking 29th place behind other Asian economies such as Japan and Hong Kong. It was also weak in certain measures of banking system efficiency.

    Market watchers seemed to take Singapore's drop in the table in their stride.

    Singapore is still an important financial centre in Asia-Pacific, said CIMB economist Song Seng Wun, citing its potential role as a second offshore yuan centre after Hong Kong as an example.

    The country will do well as long as it continues to innovate and stay relevant, he added.

    From a broader perspective, the ranking indicates a shifting balance of economic power away from the West toward Asia, in particular China, said Credit Suisse economist Robert Prior-Wandesforde.

    Although recent events in the US and eurozone may have affected this year's results, the trend of financial service development in Asia is clear, he said. 'I don't think this is a flash in the pan.'

    According to results of a PwC survey released yesterday, almost 80 per cent of respondents saw China as the most favoured listing destination for companies by 2025.

    But the going will be tough for most financial centres in the short term. In the year to date, companies raised US$155.8 billion globally - down 45 per cent compared with the whole of last year - as financial uncertainty spiked, said Ernst & Young yesterday.

    Law firm Jones Day also sees Hong Kong attracting more smaller IPO deals instead of heavyweight listings next year.

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