Hong Kong’s Securities and Futures Commission (SFC) will conduct background checks on JPMorgan Chase & Co banker Nicolas Aguzin before deciding whether to approve his appointment as chief executive of the world’s most valuable bourse operator, according to a person familiar with the deliberations.
The SFC’s 14-member board of directors met on Wednesday to discuss Hong Kong Exchanges and Clearing Limited’s (HKEX) choice for their next leader and decided to tell the city’s government it would conduct due diligence on Aguzin, the person familiar said.
The SFC will review the candidate to check if he is a “fit and proper” person to run the exchange, including his work experience and background. During the unscheduled meeting, the regulator did not set an end date for the background checks.
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HKEX named Argentinian national Aguzin as its next CEO on Tuesday, the first non-ethnic Chinese to step into the role, underscoring the bourse’s ambition to be an international financial hub even as Beijing’s influence spreads across the city. As CEO of the city’s bourse, 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.
The announcement by the HKEX, before securing the SFC’s approval is unusual. HKEX announced Li’s appointment on June 3, 2009, and said at the time that the SFC had approved its choice in writing. According to section 70 of Hong Kong‘s Securities and Futures Ordinance, HKEX’s nomination of a CEO requires the SFC’s approval in writing.
The exchange initially planned to announce Aguzin’s appointment after winning the SFC approval, but it released the news earlier than expected after Bloomberg and the South China Morning Post reported his move, according to another person familiar with the process.
Aguzin, known to his colleagues as “Gucho”, is CEO of JPMorgan’s international private bank. Before that, he was chairman and CEO of the US bank’s operations across the Asia-Pacific region.
“Given his background in international banking, and experience in Asia, he can help set HKEX’s international strategy, which builds on our connectivity with the mainland market and opens up new opportunities with other major international financial centres,” said Chan Ka-keung, chairman of WeLab bank, who is also Hong Kong’s former secretary for financial services and the treasury.
Aguzin would succeed Charles Li Xiaojia – a former banker from the same US bank, who grew up in Beijing and spent his childhood in Gansu province. Aguzin is not a Mandarin speaker.
HKEX’s fortunes are heavily dependent on continued investment flows from mainland China. New listings and investment funds flowing south from mainland China have swollen the city’s market value to HK$54 trillion (US$7 trillion), helping Hong Kong surpass Tokyo to become the world’s third-largest capital market. China-domiciled enterprises made up 52 per cent of the 2,545 companies listed in Hong Kong at the end of January, 90 per cent of the market’s trading volume and 81 per cent of its capitalisation.
Regulatory approval from China remains a key hurdle for a number of HKEX’s initiatives, such as the Stock Connect trading links with mainland exchanges, and the launch of A-share derivatives products.
HKEX’s international ambitions were on display during its failed bid for the London Stock Exchange in 2019. It is still sitting on about HK$30 billion of cash reserves. Other Asian exchanges are unlikely acquisition targets given the high political and regulatory hurdles. Instead, analysts expect HKEX to pursue an expanded offering of financial or data products.
“The appointment of Aguzin may see the exchange tilt its focus more internationally,” said Morningstar analyst Michael Wu in a note to investors.
HKEX may lean on the connections of its chairwoman Laura Cha Shi May-lung and former vice-chairman of the China Securities Regulatory Commission to build on Li’s legacy of promoting cooperation with the mainland’s flourishing exchanges in Shanghai and Shenzhen, the people familiar said.
If the SFC approves Aguzin’s candidacy, his leadership would take effect from May 24 for a term of three years.
HKEX shares rose 3.8 per cent to close at HK$534 on Wednesday.
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