Was HKEX’s move to name JPMorgan banker Aguzin as CEO meant to pressure SFC into accepting its decision?
- The HKEX board decided to promptly announce the CEO appointment after market close after discovering a news leak, according to a source
- During Charles Li’s appointment as CEO in 2009, the board secured the watchdog’s approval before making the announcement
Hong Kong Exchanges and Clearing (HKEX) was backed into a corner by a news leak when it broke protocol two weeks ago in announcing its first appointment of a non-ethnic Chinese chief executive without first securing the written approval of the city’s securities watchdog, according to a source familiar with the matter.
An urgent online meeting of the 13 directors of HKEX was called within an hour after the news was reported by the media, including the South China Morning Post and Bloomberg News, according to the source.
“We discussed three options and decided on the best option,” the source added.
The first consideration was whether the board should deny the news but the board rejected such an idea immediately as Aguzin had already been identified as the best candidate a few months earlier, the source said.
Another option was to decline to comment, but that was not ideal as HKEX is a listed company and has to follow listing rules to disclose any price sensitive information.
Eventually, the board unanimously decided to announce the appointment after market close while noting the choice would need the approval of the Securities and Futures Commission or SFC. The board, the source added, found this as the most appropriate approach to maintain transparency and in public interest.
The announcement by the HKEX before securing the SFC’s approval is unusual. According to Hong Kong’s Securities and Futures Ordinance, the exchange’s nomination of a CEO requires the watchdog’s approval in writing. The HKEX followed the rule to the letter when it announced Charles Li Xiaojia’s appointment in June 2009.
The source rejected market speculation that the HKEX released the appointment details before getting the SFC’s approval in a bid to pressure the regulator to agree on its choice of CEO. “The HKEX fully respects the vetting decision of the SFC,” the source added.
As CEO of HKEX, Aguzin will need to carefully balance the exchange’s desire to expand globally and attract overseas companies to list in Hong Kong with policy directions emanating from Beijing. If the SFC approves Aguzin’s candidacy, his leadership will take effect from May 24 for a term of three years.
Aguzin would succeed Li – a former banker from the same US bank, who grew up in Beijing. During his 11 years at the exchange, Li established the different connect schemes with China to boost cross border stock and bond trading.
Some brokers have voiced concern that Aguzin’s lack of Cantonese or Mandarin skills would hamper his ability to communicate and build ties with China. Mainland companies account for 80 per cent of HKEX’s US$7 trillion market capitalisation.
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During the selection process last year, the exchange had considered Hongkongers, mainlanders and international candidates, the source said. After due diligence the board finally concluded that Aguzin was the best candidate considering his experience as a senior international banker who had guided JPMorgan’s expansion in China in recent years. They also noted that the Argentinian’s international network built assiduously over 30 years at the US bank would help expand HKEX’s global outlook.
As an international banker, Aguzin could also help to strengthen the confidence of international investors in Hong Kong as some have raised doubts about the future of the city after the social unrest in 2019 and introduction of national security law last year, the source said. If the board had considered a mainland banker for the CEO’s position, it would not have added too much value to building and strengthening international ties.
Under Cha’s leadership, a former vice-chair of the China Securities Regulatory Commission from 2001 to 2004, the HKEX has a strong connection with mainland officials and will continue to make sure the bourse is contributing to China’s development plan, the source added.
Aguzin is aware of the challenges that lie ahead and knows China holds the key to HKEX’s success.
Some big Chinese companies have created an ecosystem for innovation and are incubating some of the best technologies in the e-commerce, financial, health care, mobility and entertainment sectors, the banker added in that interview.
