FPIs are considering shifting base to avoid disadvantage against competitors based in Singapore or Mauritius for investments in India
With the Indian government contemplating extending restrictions put on investors from mainland China to Hong Kong, foreign portfolio investors (FPIs) are looking to circumvent curbs by shifting to Singapore as the base route.
European, American and even Chinese investors are considering shifting base to avoid disadvantage against competitors based in Singapore or Mauritius for investments into India, The Economic Times reported.
Current border tensions between India and China have not boded well either. As per data, 111 FPIs, with assets in India, are registered out of Hong Kong.
"With the uncertainties regarding the investment regime applicable to Hong Kong, it is natural for businesses to consider alternative jurisdictions that offer similar proximity and convenience," said Moin Ladha, Partner, Khaitan & Co, told the paper.
Among the alternatives, Singapore with its stable funding route into India and new incentives for international funds is likely to emerge as the winner, experts told the paper.
India has continued to tighten regulatory restrictions around China, and by extension Hong Kong, since April, when the Centre notified that all investments from neighbouring countries would face scrutiny and require government approval. The Securities and Exchange Board of India (SEBI) also upped disclosure requirements for funds from China; and curbs on FPIs from China and Hong Kong are also expected soon.Lawyers also deemed Singapore the 'safest bet' since the city-state follows the General Anti-Avoidance Rules (GAAR), and many Hong Kong-based FPIs already have significant presence in Singapore – helping them prove the shift is not related to tax avoidance.