The Singapore opportunity

Australian capital has long recognised the value of investing in the Asia-Pacific region. The opportunities on Australia’s doorstep are clear and abundant.

By 2040, the south-east Asian region is expected to become the world’s fourth-largest economy, fuelled by shifting demographics, ongoing industrialisation, and continuing technological advancement.

Within this market, Singapore remains a standout opportunity, serving as a window into the broader south-east Asian market. The AAA-rated city-state is a key regional and global hub for trade, transport, and finance, and an important contributor to a number of advanced manufacturing value chains.

Singapore is ranked as one of the leading global financial centres in the world, according to the Global Financial Centre Index, behind only New York , London and Hong Kong. The city-state boasts more than 150 banks and finance companies with more than $US2.5 trillion in assets.

Singapore’s strong regulatory framework and extensive financial ecosystem comprising of banks, fund managers, custodians and other service providers present an enticing opportunity for asset owners and managers to source funds and access investments. The opportunity for Australian businesses to facilitate, and be involved in, this trade and capital investment flow is abundantly clear.

Trade between the two economies is already strong. Official data showed Singapore was Australia’s fifth-largest trading partner in 2022-23, and sixth-largest source of foreign direct investment, at $A141 billion in calendar 2023.

Among the sectors best placed to take advantage of this opportunity in Australia are institutional investors such as the superannuation funds. One of the largest pension industries in the globe, Australia’s compulsory contribution system (11.5 per cent as of July 2024) has seen total funds under management in the industry swell to a reported $A3.5 trillion.

The nature of Australia’s market – smaller than many of its advanced-economy peers – means the scope of local super is more than can be invested locally, even if the industry wanted to. In response, recent reports suggest between 45 per cent and 50 per cent of total asset allocation leaves Australia’s shores.

That’s where Singapore comes in.

Hub

According to the Monetary Authority of Singapore, assets managed in the city state reached $S5.4 trillion in 2023, up 10 per cent year on year. Of those funds, 77 per cent were sourced from outside Singapore and 89 per cent invested outside its borders (with 42 per cent of that portion invested into the Asia-Pacific region). Singapore is the workplace of around 1200 registered and licensed fund managers.  

Singapore’s private equity and venture capital assets under management (AUM) have grown to nearly $US400 billion, while many managers have co-located their fund domiciliation activity as well, especially after the launch of the variable capital company (VCC) framework in 2020. The Singapore asset management ecosystem is supported by more than 300 fund service providers including legal and tax advisors, fund administrators, and corporate secretaries.

The city-state has built an innovative fintech ecosystem, with digitalisation a key focus, including tokenisation of financial and real economy assets. More than $US4 billion was invested in the sector in 2022 alone.

Singapore’s focus on renewable energy and the shift towards a net-zero carbon economy also present a significant opportunity for outside investment. Here Singapore again provides a solid foothold in the south-east Asian region, which according to the Asian Development Bank requires close to $US210 billion in public and private finance every year until 2030 for investments in climate-resilient infrastructure.

The city-state is also working with neighbour Malaysia on a proposed special economic zone in a bid to foster economic activity. The “Johor-Singapore Special Economic Zone” would aim to attract infrastructure and manufacturing investment, particularly in the transportation space. Negotiations are ongoing, although major companies like Nvidia and GDS Holdings have already reportedly invested in projects that will benefit from the scheme.

Exposure

Singapore is a key location for global public investors, such as sovereign wealth and pension funds, to access public and private market opportunities across Asia.

It’s important for all businesses looking in to the region to understand south-east Asia is very diverse - culturally, linguistically, politically and economically. There is no one size fits all when it comes to doing business in this region, or any others.

Singapore, ranked first in the Asia-Pacific region and second globally for talent competitiveness by INSEAD, is a popular and convenient location to centralise south-east Asian operations, but ensuring a business has the right people – and the right partners - that are familiar with the regions they are conducting business in is vital. Australia’s large south-east Asian diaspora – perhaps an underappreciated resource within its borders – is able (and largely willing) to be tapped.

The region is not without risk, and none are. Any investment needs to commit for the long term; viewing the path to success as a marathon, not a sprint. Direct investment requires more than funding; focus, effort, due diligence on risks, and local partnerships. Feet on the ground is important, and it’s easy to fall into the trap that Australia is ‘close enough’ to Asia that such a thing is not required. A lot, too, will differ between industries and individual businesses.

At ANZ, we understand the Singapore opportunity. The year 2024 marks the bank’s 50^th anniversary in the city-state. Chief Executive Officer Shayne Elliott was recently named a ‘Singapore business champion’ by the Australian government.

ANZ has invested significantly in Singapore, as part of its strategy to support movement of trade and capital for multinationals and financial institutions around the world and into its home markets of Australia and New Zealand. The bank has approximately 760 bankers on the ground in Singapore, covering around 500 investment-grade clients across technology; transport and logistics; resources, energy and infrastructure; commercial real estate; financial institutions and more.

ANZ is excited by the Singapore opportunity, and looking forward to seeing how it develops in the future – from the ground.

Yeekei Chan is Head of FIG, South East Asia, India & Middle East and Li Ling Kwan is Head of FIG Singapore at ANZ