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Trading places

9 February 2021 By Jennifer Hughes

The Hong Kong stock exchange is keeping one eye squarely overseas. Its $85 billion parent company has picked longtime JPMorgan banker Nicolas Aguzin to be the next chief executive. His most important tasks will be to keep foreign investors sweet and the gateway to China opening wider.

Hong Kong Exchanges and Clearing is swapping one JPMorgan banker for another. Charles Li, who stepped down as CEO in December, had served as the bank’s China chairman before taking the helm in 2010. He was as well-known locally for his tangled metaphors as he was for growing HKEX and a failed $39 billion attempt to buy the London Stock Exchange in 2019. The Argentinian Aguzin, a 22-year JPMorgan veteran, is more understated, but built a strong network across the region as Asia Pacific chief before running the international private bank.

If the early-year momentum persists, Aguzin will start in May with the bourse riding high on record trading volumes. It also is being buoyed by a wave of mainland buying through the trading link Li established with Shanghai and Shenzhen counterparts as well as fevered trading in a growing collection of technology stocks. HKEX’s own share price is up 21% this year, outperforming the benchmark Hang Seng index.

One of the biggest challenges at HKEX is balancing China’s interests with those of the investment community abroad. Aguzin will have Chairman Laura Cha to help him navigate Beijing, which should help him focus on the exchange’s claim of being a conduit to the mainland. New rules make it easier for foreigners to trade onshore, meaning there’s a risk they eventually bypass Hong Kong, where stamp duty makes buying and selling pricey. Issuers also will need wooing: while listing in Hong Kong used to be a goal for Chinese startups, many can get higher valuations on Shanghai’s new STAR board or Shenzhen’s revamped ChiNext. HKEX has been diversifying into bond trading and derivatives, but half its revenue comes from equities.

The exchange plays an important part in preserving Hong Kong’s role as a financial hub, not least because the government approves half its board appointments. There are political sensitivities at home, but Aguzin will have to successfully deliver on the international side.

 

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