Singapore and Hong Kong

Dec 12, 2008
*Special to asia!
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In the long running pissing match between Singapore and Hong Kong, the latter seems to have won the latest round. Well, sort of.

On June 25, Hong Kong announced the setting up of a commodities exchange. The Hong Kong Mercantile Exchange (HKMEx) will start running early next year, its first product a US-dollar denominated fuel oil contract for delivery in China.

Barely two weeks later, Singapore also announced its own commodities exchange. Surprise, surprise. The Singapore Mercantile Exchange will also start running in the first half of next year. And while SME hopes to trade on a wide variety of products from agri-commodities to metals, minerals and even carbon credits, it is also likely to offer fuel oil contracts as one of the earliest, given that Singapore is one of the world’s top energy trading hubs.

Two city economies, two aspiring international mercantile exchanges. Even if commodity prices are booming and Asia now accounts for half the global trade, can the continent sustain one, let alone two more exchanges?
Jignesh Shah, the driving force behind SME, claims, "There is enough business for everyone." But many traders doubt it. Given that commodity hedging is still in its infancy in Asia – most of the trading houses SME count on as customers are already trading in western exchanges – it would seem to make good sense for Singapore and Hong Kong to combine strength to develop a really good exchange, rather than diluting potential business in two directions.

Perhaps, but Singapore and Hong Kong are like two overgrown schoolboys – emphasis on the word "boys" – who always compete with each other and refuse to be the first to give way.

Things were better in the 1980s and 1990s when the two pursued somewhat different growth paths. Today they seem to be doing everything the same way, and taking great pleasure in outdoing each other.

The rivalry became personal – at least to Hong Kong Chief Executive Donald Tsang – after he was told by Chinese Premier Wen Jiabao last November to “learn from Singapore” in many things from attracting talent to taking care of the environment.

This year, Hong Kong Financial Secretary John Tsang Chun-wah (good friend but no relation to Donald) was noticeably gleeful when he managed to snag a solar polymide film maker which was avidly courted by Singapore to set up in Hong Kong (and the adjacent Shenzhen).

John Tsang is now no doubt chortling in his moustache for stealing a match on Singapore in announcing HKMEx in advance of SME.

In the long run, however, this sort of alpha male attitude could work to the disadvantage of both Singapore and Hong Kong. There are, after all, many other exchanges in Asia and elsewhere that are doing what both HKMEx and SME are trying to do. In India alone there are already 23 commodities exchanges, according to Jignesh Shah.

Shah, 41, is the founder of Financial Technologies (India) Ltd, which owns 32 % of the Multi-Commodities Exchange in Mumbai, one of the largest in the world. A self-made man, Shah’s background parallels that of Tsoi Tin-chun of Titan Petrochemical, the man behind HKMEx, who is four years older and who also created a fortune through astute business sense and sheer determination. Interestingly, while Singapore now depends on an Indian national to realize its dream of an international commodity exchange, Hong Kong is relying on a Chinese national who has taken on Singapore citizenship. More case for the two to work together rather than compete?


lee han shihLee Han Shih is the founder, publisher and editor of asia! Magazine.


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