HK takes top spot in financial ranking

Singapore has slipped a notch to fourth in the annual World Economic Forum's (WEF) Financial Development Index, while rival Hong Kong has taken top spot for the first time.

Hong Kong, fourth last year, has become the first Asian economy to achieve the top standing since the index was developed in 2008.

It overtook the United States, which dropped to second, and Britain, which fell a place to third.

The index analyses various factors in an economy's financial system, such as the cost of doing business, listing activity on its stock market and its tax regime.

The WEF reported that although Singapore has a strong institutional and business environment, its scores in banking financial services, non-banking financial services and financial markets dipped.

Singapore's score in banking system efficiency also took a hit this year, which dragged down its overall ranking.

"Nevertheless, Singapore continues to make access to commercial capital readily available," the WEF said.

"This is further highlighted by a strong venture capital presence and high level of foreign direct investment."

Hong Kong also showed considerable strength in its business environment and financial stability, the WEF said.

"Specifically, business environment performance is driven by a strong tax regime and highly developed infrastructure, whereas financial stability is positively affected by the low risk of sovereign debt crisis," the WEF report said.

"Non-banking financial services such as IPO [initial public offering] activity and insurance show considerable improvement as Hong Kong moves up nine and five spots in these indicators, respectively."

Access to commercial capital remains a strong point for Hong Kong, with equity market financing and foreign direct investment being particularly robust, the report added.

Australia, Canada, the Netherlands, Japan, Switzerland and Norway round up the top 10 behind Singapore.

China rose three places from last year to 19^th whereas most euro zone countries slipped as they struggled to contain their debt crisis. Germany dropped one place to 14^th.

"There is considerable hope riding on emerging economies' ability to provide growth until advanced economies are back on the recovery track" the WEF said.

"However, many emerging nations are still partially dependent on the financial systems of advanced economies."

For example, the decrease in the supply of loans in advanced economies has had a spillover effect on emerging economies.

Meanwhile, advanced Western countries are grappling with legacy issues from the crisis and its effects on their domestic economies.

"A specific challenge will be to instill financial stability without having the negative side effect of inhibiting economic growth," the WEF added.

Among the 60 economies included in the index, Nigeria was ranked in last place, with Venezuela just ahead.