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Hong Kong Stock Exchange

It's all change at the stock exchange

PUBLISHED : Thursday, 01 March, 2012, 12:00am
UPDATED : Thursday, 01 March, 2012, 12:00am

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Hong Kong stock exchange chairman Ronald Arculli will step down next month, while two directors tipped as front runners to replace him will quit the same month, leaving the race for the job wide open.

Hong Kong Exchanges and Clearing said yesterday in its results statement that government-appointed directors Laura Cha Shih May-lung and Moses Cheng Mo-chi would step down after serving on the board for six years - the government generally does not appoint anyone as director to public bodies longer than that.

Among the 13 HKEx directors, six are selected by the shareholders and six are appointed by the government, with the chief executive taking the remaining slot.

By law, the HKEx chairman has to be approved by the chief executive, making the government an important player in the selection process. Both Arculli and his predecessor, Charles Lee Yeh-kwong, were appointed to the board by the government.

Government sources said that since Hong Kong's new chief executive would not be selected until March 25, the race to lead the exchange was wide open, with no favourite candidate emerging. The HKEx will need a new chairman after its annual general meeting on April 23, the last one to be chaired by Arculli. That will leave less than a month for the new chief executive to pick Arculli's successor.

Outgoing director Cha is a former vice-chairwoman of the Securities and Futures Commission, while Cheng used to be the stock exchange's listing committee chairman, which made them the front runners to be Arculli's successor.

A source at HKEx said the government at one point had considered waiving the six-year convention for either Cha or Cheng to allow one of them to take the job. The idea was dropped for fear it might stir up a controversy, and also because neither Cha nor Cheng were particularly interested in the job.

The buzz is veteran broker Bill Kwok Chi-piu and banker Chan Tze-ching, both HKEx directors, are the two likeliest candidates. Some are also betting on former KPMG China chairman Carlson Tong Ka-shing, but others believe he will most probably take over as SFC chairman when Eddy Fong steps down in October.

This year will mark a major reshuffle for the HKEx board as six of the 13 members will retire. Apart from Arculli, Cha and Cheng, two directors elected by shareholders, Chan Tze-ching and John Williamson, will also retire but may seek re-election at the exchange's annual general meeting.

The three-year contract of HKEx chief executive Charles Li Xiaojia, who is also a director, expires in October. Asked if his contract would be renewed, Li said: 'No one has talked to me about that,' but added: 'I love my job. I have a great time here as I enjoy what I am doing.'

The exchange yesterday reported a flat net profit of HK$5.09 billion for last year, up only 1 per cent, in line with market expectations. Evidently turnover did not increase after the exchange extended trading hours last March by deciding to open the market 30 minutes earlier and cutting the two-hour lunch break to 90 minutes. Average daily turnover rose only 1 per cent to HK$69.7 billion last year.

But Li said the exchange would still extend trading hours a further 30 minutes from Monday. 'Extending the trading hours is important in enhancing the competitiveness of the Hong Kong market,' he said.

The exchange's profit was also hurt by the poor market sentiment that pushed back many new listings. The Hang Seng Index dropped 20 per cent last year as the euro zone crisis dragged on.

Li said the HKEx would hire 100 more staff this year, bringing the total to more than 1,000, to handle new projects such as over-the-counter derivatives clearing, a new data centre and yuan share trading.