Singapore Inc hopes its ability to access the most advanced AI models will help hold back a tide of investment managers leaving for Hong Kong, which is introducing sweeping tax cuts.
Asia’s two biggest financial hubs have long competed for international white-collar workers and to attract the world’s biggest investment companies and banks.
The latest phase of the rivalry is focused on lowering the tax bill for high-paid money managers and making it easier for businesses to access cutting-edge AI technology.
“This is all about offering certainty to businesses,” said Kher Sheng Lee, co-head of Asia-Pacific at the Alternative Investment Management Association (Aima).
“With tax, you want to know how much you will pay to put your business on a firm footing. For AI, you need to make sure you have access to the latest tools.”
Aima warned last month that several of its hedge fund and private equity members in Singapore were considering moving senior staff to Hong Kong to benefit from incoming tax cuts.
Meanwhile the FT reported this week that Hong Kong was looking at ways of including some trading firms such as Jane Street in the reforms, although a government spokesperson later tried to pour cold water on the plans.
While Hong Kong’s finance sector is experiencing a resurgence on the back of a boom in Chinese listings in the special administrative region, several banks and investment managers have grown frustrated at the difficulties of accessing the latest western AI models.
Tools such as OpenAI’s ChatGPT and Anthropic’s Claude are banned in mainland China as part of the so-called Great Firewall. Hong Kong has long operated mostly free of Chinese censors, although restrictions on usage are imposed by the US AI companies themselves.
Those restrictions have led to several banks, including Goldman Sachs and JPMorgan, preventing access to models such as Claude.
Quantitative hedge funds, which rely on powerful mathematical algorithms to beat the market, are especially reliant on the most advanced frontier AI models to gain an edge over rivals.
Justin Tan, head of financial services in Asia at LEK Consulting, said he was hearing from more investment managers — especially quant funds — based in China and Hong Kong that were considering moving research and trading staff to Singapore to gain access to AI models and powerful chips that are not available in China.
“In terms of access to technology, Singapore is seen as a bit of a sweet spot,” he said.
Singapore’s close relations with the US and China mean the latest AI models from both countries — including those developed by Chinese companies such as Moonshot’s Kimi K3 and DeepSeek — are easily accessible in the city-state.
“Singapore’s open access to the strongest AI models — frontier and open-weight alike, wherever they are built — is a genuine differentiator,” said Aima’s Lee.
US hedge fund giant Citadel recently told researchers in its Hong Kong-based global quantitative strategies team that they either had to relocate or resign.
Three people familiar with the moves told the FT they believed concerns over data security were part of the reason for relocating employees who are key to the fund’s intellectual property. Staff were offered moves to Singapore or Miami, where Citadel is headquartered.
At the time Citadel denied that the moves were related to concerns about data security, saying it relied on “incomplete facts from sources with limited knowledge”.
Hong Kong suffered an exodus of expat professionals in the years following the Covid-19 pandemic over concerns about political unrest and a perceived heavy-handed response to the pandemic.
The Chinese territory has sought to convince international financial workers to return with a package of reforms to its tax rules on carried interest and performance fees. Under the measures, profits from a wide range of investments would be eligible for tax treatment as carried interest at a zero per cent rate.
The changes would mean individual managers of hedge funds, private equity, venture capital, private credit and even family offices could structure themselves to reduce further their already low Hong Kong tax bills.
Benjamin Hung, chair of Hong Kong’s Financial Services Development Council, the government advisory body that championed the changes, said they would be “helpful incentives” to attract workers.
“Ultimately, Hong Kong needs to provide that platform where [you have] knowledge, information, rule of law and the ability to move money in and out,” he said. “That is our structural advantage — tax would be a tactical play to bring people in.”
The moves have sparked alarm in Singapore’s investment industry, which fears they will lead to many high-paid portfolio managers trying to relocate to Hong Kong to reduce their tax bills.
This has led to discussions in recent weeks between the fund managers and the Monetary Authority of Singapore, the financial regulator, about what can be done to maintain the city-state’s competitive edge.
The talks have covered a wide range of measures — including tax cuts for individuals and investment companies, as well as making it easier for businesses to recruit foreign workers — according to several people familiar with the discussions.
One measure under discussion is reducing the tax rate of a special incentive scheme, where investment groups pay 10 per cent compared with Singapore’s standard corporate rate of 17 per cent.
The MAS told the FT it was “reviewing measures to sharpen the competitiveness of Singapore”.
Aima wrote to the regulator last month on behalf of its members, saying that reforms should be about “renewing Singapore’s proposition” rather than “matching Hong Kong”.
While the main focus of the latest industry talks has been on tax and attracting talent, the trade body also praised Singapore’s open access to the strongest AI models and MAS’s approach to encouraging AI adoption within the investment industry.
“Done well, this becomes a story Singapore tells on its own terms, the Singapore advantage, rather than a footnote to Hong Kong’s announcement,” Aima said.
