Exclusive | From oil rigs to Wall St, HKEX chief executive Charles Li has seen it all – and is using his experience to diversify Hong Kong’s bourse
- HKEX chief executive has been voted the 2019 Businessperson of the Year at the DHL-SCMP Hong Kong Business Awards
- Not giving up on M&As, tie-ups following failure to acquire London Stock Exchange, Li says
Charles Li Xiaojia, the chief executive of Hong Kong Exchanges and Clearing Limited (HKEX), has had a career that reflects the tremendous growth and seismic changes China’s economy has undergone over the past four decades. He is – by his own reckoning – adept at responding to change.
“My generation [went] through many changes, [so] we learned to adapt, anticipate, prepare for changes – and [to] make sure these changes reflected our values, so that they would do good,” Li, 58, said in an interview with the South China Morning Post. “Having done different things, you tend to look at things through different lenses … from different perspectives. When you face hurdles, challenges, or setbacks, past experiences help you survive and overcome obstacles.”
Adaptability has served Li well, catapulting him from an offshore oil rig in north-eastern China to one of Wall Street’s biggest banks within two decades, and since January 2010, to the highest-paid job in Hong Kong’s financial industry. It is also a quality that might help HKEX regain the coveted crown of the world’s fundraising capital for the seventh time in 11 years.
The exchange also opened up cross-border investment channels that let mainland Chinese investors tap Hong Kong shares, an innovation that has boosted HKEX’s capitalisation to HK$35.6 trillion (US$4.5 trillion), making it the third-largest bourse in Asia after the combined mainland Chinese markets and Tokyo.
“We are no longer a one-trick pony that totally relies on the average daily turnover of the stock market,” Li said. “HKEX is no longer too dependent on cash or stock market turnover. We have become increasingly more diversified, with many derivative products and structured products.”
The average daily turnover, the lifeblood of any financial market, rose 73 per cent to HK$107 billion last year from HK$62 billion in 2009, before a combination of the US-China trade war and Hong Kong’s worst political crisis started to weigh on sentiment.
Shares of HKEX, which is also listed on the bourse, have risen from HK$139.4 at the end of 2009 to HK$244 as of market close on Thursday. Li joined the company in 2009 and succeeded Paul Chow Man-yiu as CEO in 2010. Over the course of his tenure, the number of companies listed on the Hong Kong stock exchange has more than doubled to 2,436 as of the end of November, a fundraising frenzy that has driven the exchange to surpass New York as the world’s favourite fundraising market six times – five times under Li – since 2009.
We are no longer a one-trick pony that totally relies on the average daily turnover of the stock market
In his latest three-year plan announced in February, Li said he wanted to see HKEX set up more connect schemes linking mainland Chinese markets with international investors. He said he wanted the bourse operator to become Asia’s leading wealth management centre, and for it to run a technology-driven exchange.
“The listing reforms have built on our connections with the new economy. We are now absolutely a global leader in connecting capital markets with new economy companies, biotech companies and other new breeds of companies,” Li said.
HKEX failed to acquire the London Stock Exchange for £29.6 billion (US$38.4 billion) in September, and Li admitted the timing of the bid was not right. But he is not giving up on mergers and acquisitions and other tie-ups in the future.
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“We want to make sure we are very well placed to build out our fixed income, commodities and currencies offering amid the internationalisation of the yuan,” he said. “Hong Kong, traditionally, is very strong in equities. We would consider acquisitions if they helped us to build out our capabilities in this regard. As such, we will keep our ears and eyes open,” he added.
Mike Wong Ming-wai, chief executive of The Chamber of Hong Kong Listed Companies, said Li had a grand vision for Hong Kong, highlighted by the acquisition of the London Metal Exchange. “Mr Li is someone who is willing to try new ways to expand the market,” he said. Even the recent failed attempt to acquire the LSE showed he had the vision to use M&As to take the HKEX global, Wong added.
Li, who got his first job at the age of 16 in 1977, during the twilight years of China’s Cultural Revolution, has his sights firmly set on the future. Under his guidance, HKEX is looking into the possibility of turning data into an asset class to be traded on the exchange. “We are also actively looking at how to use artificial intelligence, blockchain and cloud computing to enhance trading and settlement. These technologies, as well as data, are going to redefine the future of the financial industry,” he said.
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At first it might seem like there is no link between the various jobs he has held, but Li said “each disappointment would teach me important lessons, and I would then take this and move on to the next thing”.
At his first job, he worked on an offshore rig for a state-owned oil company. “I could not get enough to eat,” Li said. “That experience helped me to cope with setbacks later on in my career.”
Four years on, as China embarked on its market reforms, Li signed up for a course in English Literature at Xiamen University, where he would also meet his future wife. After graduating in 1984, he worked as a reporter for China Daily for two years before going on to earn two more degrees in the United States, including a law degree from Columbia University.
In 1994, a year after China started allowing mainland Chinese state-owned enterprises to list in Hong Kong, he began his career as an investment banker with Merrill Lynch in New York. The bank would move Li to Hong Kong in 1995 and make him president for China in 1999. In 2003, he joined JPMorgan as its chairman, before moving to HKEX in 2009.
In his 15-year career as an investment banker, Li handled many deals for state-owned companies such as China Mobile, China Telecom and China National Offshore Oil Corporation (CNOOC).
His experience has proved crucial for HKEX’s successful diversification. “I have done a lot of things,” Li said. “I [have] made progress at each step, in terms of skills, experience and financially.”
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He earned HK$28.97 million in salary, bonus and other benefits last year, and lives in Hong Kong with his wife and three dogs. Three grown-up children, a son and two daughters, live abroad but visit frequently.
“Hong Kong is my home … I am very proud to call it my home,” Li, who was born in Beijing, told the Post.
The city’s economy has been left in tatters by about six months of anti-government protests, and went into a technical recession in the third quarter.
The former journalist did occasionally stray into trouble, including a remark on October 31 in London about the “fundamental flaws” of Hong Kong’s autonomy under the “one country, two systems” model of governance. He apologised for making those remarks a day later, saying the system’s design was perfect but its implementation was not.
“Hong Kong has passed through many crises, such as Sars [severe acute respiratory syndrome] in 2003 and the global financial crisis in 2009,” Li said, adding that he wanted to see a swift and peaceful resolution to its current troubles.
“We do not know how the current situation will end, but in longing for what they want, people need to be careful that they do not lose what they have. I want nothing but the best for Hong Kong,” he said.
