Lai See | HKEx still feels the pain of losing Alibaba to the United States

Looking at HKEx's interim results we were struck by a paragraph in the chairman's statement which said, "We never lose sight of our responsibilities as an exchange controller, a regulator as well as a listed company". Although chairman Chow Chung-kong says he never loses sight of this triple responsibility, one thing he doesn't seem to see is the conflict of interest that is inherent in this arrangement.

As a listed company HKEx is duty-bound to maximise profits for its shareholders. The executives and management are incentivised to work to this end, hence their juicy bonuses. But as regulator it is not focused on maximising profits but is, or should be, more concerned with running a fair and orderly market and maintaining high listing standards. It's not hard to see the conflict here.

Indeed this dilemma was nicely encapsulated by the debate over whether or not Alibaba should be listed in Hong Kong. The pain at the exchange for having let such a milch cow slip through their fingers was palpable. They were at a number of meetings to try and get round the vexed issue of Alibaba's dual-class shares. In one of his blogs HKEx chief executive Charles Li Xiaojia observed that one share, one vote, has a nice ring to it and, "if we only care about reputation, this approach will certainly help to maintain Hong Kong's nominal regularity purity". But this position has a price. "If this becomes a trend, Hong Kong could lose a huge franchise for good," referring to the possible loss of new China listings to the US exchanges.

But Chow's recent chairman's statement gave no inkling as to how this problem was to be resolved. He simply says, "Therefore, we will continue to review our regulatory regime with a view towards upholding market quality, and we will explore further collaboration with our stakeholders to drive sustainable performance in the economic, social and environmental dimensions of our industry." Clearly this issue has not gone away.