Adios, Mr. China. HKEX Takes a Turn Down Argentine Way

Hong Kong’s markets are on an irreversible path toward closer integration with China, Charles Li, outgoing chief executive officer of the city’s stock-exchange operator, observed in December. So when Hong Kong Exchanges & Clearing Ltd. was looking for a successor to Li, it naturally opted for an Argentine.

Nicolas Aguzin, currently CEO of JPMorgan Chase & Co.’s international private bank, will begin a three-year term in May, HKEX announced after trading closed Tuesday. Contrary to what appearances might suggest, it’s an astute choice.

The obvious, and logical, pick would have been a Chinese executive with global experience and deep connections in both the mainland and Hong Kong markets. The trouble is that any such candidate would probably have suffered by comparison with Li, who himself had the perfect credentials. Naming a CEO from outside the region sidesteps that dilemma. It also sends a convenient political message: that Hong Kong remains a place of opportunity for international business executives, amid a news agenda dominated by stories of residents fleeing the national security law imposed on the city by Beijing last year.

The search for Li’s replacement was long and difficult, with the selection committee split between prioritizing a candidate who could operate with confidence in China and one with a strong international background, Cathy Chan and Benjamin Robertson of Bloomberg News reported in December. It’s not hard to imagine why. Appointing a candidate in the mold of the departing CEO would only have raised the question of why he was allowed to leave in the first place, at the tender age of 59.

By any measure, Li’s 11-year tenure was a success. The Beijing-born former U.S. banker was the first Chinese national to run the exchange. He bought the London Metal Exchange in 2012, and earned the name “Mr. China” for establishing trading links with the Shanghai and Shenzhen markets. HKEX shares almost tripled under his leadership, vastly outperforming the benchmark Hang Seng Index, and revenue doubled.

Li announced he was stepping down in May, seven months after the withdrawn $36.2 billion takeover bid for the London Stock Exchange. That misstep looked like a plausible trigger for his exit, though in reality the costs of the failure were negligible — the equivalent of about $16 million, a small fraction of HKEX’s 2019 profit of $1.2 billion. The real damage was political, with Beijing’s cool response to the LSE bid undermining Li’s reputation as an adept navigator of China’s corridors of power. That standing suffered a further dent when the voluble CEO apologized for inopportune remarks on the “One Country, Two Systems” framework during the Hong Kong protests in November 2019.

Li wasn’t the only China expert in HKEX, nor even the most senior. Chairman Laura Cha, a former vice chairman of the China Securities Regulatory Commission, was put off by Li’s free-wheeling style and thought he had been given too much credit for the landmark deal connecting trading between Hong Kong and the Shanghai and Shenzhen exchanges, Bloomberg’s Chan and Robertson reported in December, citing people familiar with the matter. Cha, a government adviser who’s close to Hong Kong’s unpopular leader Carrie Lam, saw the exchange’s role as serving Beijing’s interests and avoiding competition with mainland bourses, they wrote.

Aguzin is hardly a China neophyte. The 52-year-old was JPMorgan’s chairman and CEO for the Asia-Pacific region from 2012 to 2020, and was based in Hong Kong. Yet as a non-Chinese speaker working under a chairman with definite ideas about HKEX’s role and standing in the country, it’s not a stretch to fancy that his focus may often be elsewhere. HKEX has ambitions to develop its derivatives and technology, among other areas that are likely to keep him busy. Perhaps even a Buenos Aires stock connect?

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Matthew Brooker is an editor with Bloomberg Opinion. He previously was a columnist, editor and bureau chief for Bloomberg News. Before joining Bloomberg, he worked for the South China Morning Post. He is a CFA charterholder.

©2021 Bloomberg L.P.

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