Subsequent week, at the very first in-particular person Earth Economic Discussion board in two yrs, Nicolas Aguzin will try to persuade executives and officials that China is open up for enterprise.
The main govt of the Hong Kong inventory exchange — a previous JPMorgan banker and its to start with non-Chinese boss — was brought in one particular year in the past to speed up the integration of China’s financial system with worldwide finance.
“The main objective of all the things we’re trying to do is to make confident that we continue connecting China and the earth,” Aguzin told the Economic Moments. “I’m not saying it’s an simple agenda, [but] that’s what we have to do.”
But because he took around, decoupling between China and the US has intensified. Progress in China is being strangled by lockdowns to accomplish “zero-Covid” as Beijing is pursuing a regulatory crackdown that has wiped trillions of bucks from companies’ marketplace worth and resulted in a worldwide retreat from Chinese stocks.
“He is a target of circumstance,” said a particular person close to the HKEX board. “The charitable way of deciphering it is to say he’s been prevented from acquiring started out — a further way is indicating he hasn’t realized quite a lot.”
The plan to reinforce HKEX’s part as the bridge concerning east and west has been “defeated for the time remaining mainly because of the hardening by the US towards China”, the particular person additional.
Following getting cut off from the international fiscal community due to the fact early 2020 — Hong Kong only lifted limits on non-people to enter the metropolis in May — Aguzin will guide the HKEX delegation in Davos alongside Laura Cha, its chair and a veteran Hong Kong businesswomen.
For Aguzin, who does not speak Mandarin, retaining a excellent romance with Beijing means leaning on HKEX chair Cha, who was a vice-minister of finance in Beijing in the early 2000s.
“HKEX is a extremely political place,” said a senior financier in Hong Kong who is an acquaintance of both equally Aguzin and Cha. “I really do not know if any one is likely to do that career nicely, there are a great deal of men and women you have to retain content.
The Davos vacation arrives after Aguzin produced his to start with check out to mainland China as HKEX main government in March. He was identified as to Beijing as President Xi Jinping’s govt prepares to additional open up China’s capital marketplaces and works to spend up to $50tn of house belongings outside its borders.
Aguzin, an Argentine who goes by his childhood nickname “Gucho”, said that Beijing officials expressed “significant fascination in building positive Hong Kong is plugged into the worldwide market” through his check out.
That suggests preserving the ties in between the world’s two major economies, claimed Aguzin. “Everything we’re executing right now is to try to avoid these forces that we’re looking at of . . . technology decoupling and trade also halting. No interaction [between China and the west] can not be superior for any one.”
Worsening pressure between China and the US, aggravated by the war in Ukraine and the risk of sanctions, have strained Hong Kong’s job as a fiscal intermediary concerning the two superpowers.
“The geopolitical atmosphere is pretty delicate suitable now,” Aguzin stated. “The combination of geopolitics [and] the pandemic has produced currently being the bridge a minimal little bit more durable.”
HKEX noted its worst quarterly revenue in two several years in March. Hong Kong’s overall fairness fundraising in the to start with quarter fell 90 for every cent from a yr back to the least expensive stage due to the fact the international economic disaster, although the market place price of HKEX has fallen by close to a quarter — or approximately $19bn — due to the fact Aguzin took around last May well.
Critics say that HKEX has grow to be around-reliant on Chinese capital, with Chinese businesses accounting for pretty much 80 for each cent of Hong Kong’s HK$37.6tn ($4.8tn) inventory industry.
“They really should have done considerably more more than the final 30 years to boost Hong Kong as the Asian fiscal hub and not just a mainland Chinese economical hub,” stated David Webb, a previous HKEX board member.
But, he extra, “it’s in no way much too late, and they do appear to be to be realising they’re overexposed to just one economic system.”
Tries to diversify have incorporated a failed bid to get the London Stock Exchange in 2019 below Aguzin’s predecessor, Charles Li.
This yr, Aguzin secured the IPO of yachtmaker Ferretti, the initial Hong Kong-listing by an Italian organization in much more than a decade, however it raised just $243mn and its shares are trading down below their listing rate.
In the earlier, the focus on China was not these a challenge. “I under no circumstances get rid of any slumber if we don’t have a lot of worldwide listings,” claimed a previous executive of HKEX.
“As extensive as Chinese businesses are coming here mainly because of the worldwide capital, and intercontinental cash arrives in this article mainly because of the Chinese listings, it’s the excellent match.”
That product is remaining tested by deteriorating US-China relations and Beijing’s regulatory assault. A push by Aguzin to internationalise HKEX by way of a overseas acquisition would likely be intricate by the chance of US sanctions for any goal firm, in accordance to men and women near to the trade.
HKEX’s governance, which features a number of political appointees of the Hong Kong government, has hindered talks on foreign growth in the past, in accordance to a person of the people.
“I’m not going to near my eyes to any international prospect,” Aguzin claimed, “but I also recognise that it is seriously challenging to do.”
Hong Kong has not benefited from an predicted increase of deals redirected from the US soon after Beijing launched a cyber safety probe into experience-hailing application Didi Chuxing shortly after its New York IPO. A year afterwards, it is not obvious if Beijing will give a green mild to Hong Kong listings of Didi or other organizations with sensitive details.
“Homecoming” share sales of Chinese firms on Wall Street have slowed in Hong Kong even as the US has warned it will de-list 270 Chinese organizations by 2024 around obtain to financial audit data.
The souring sector sentiment in direction of China has resulted in a “listing visitors jam”, in accordance to the 2nd govt shut to the exchange. All over 150 companies — all but four of them from Larger China — have been granted a greenlight by HKEX but have not however gone in advance with listing their shares, according to knowledge from Dealogic.
“If you try to undertaking what is heading to come about in the subsequent 3 or 4 months or even the next 12 months, it’s heading to be really, very challenging,” Aguzin mentioned, citing the “soft” valuations in tech stocks and the IPO slowdown. “But if you search at the subsequent five or 10 a long time, the options are huge.”
Seizing the chance requires reform, said Aguzin. HKEX has been criticised for its famously large limitations to entry, these as minimum amount income requirements, that make its listings far more expensive and time-consuming compared to New York or London.
In January, HKEX changed guidelines to make it simpler for Chinese businesses mentioned abroad to carry out secondary share income and opened the trade to Spacs. Nevertheless, the reforms had been “cautious”, in accordance to a human being on just one of HKEX’s advisory boards, noting that Spac listings in Hong Kong have been far much more onerous than rival exchanges.
Aguzin is also dealing with pressure in the British isles wherever the Monetary Perform Authority is investigating a fiasco at the London Steel Exchange — which is wholly owned by HKEX — that still left the world’s main nickel marketplace suspended for times.
It is a different headache for Aguzin as he travels to Davos to salvage a tough year in demand of the Hong Kong exchange, but he is clear about his mission.
“What I want to make absolutely sure is that we can just manage that connectivity,” he claimed. “I’m not wanting for the statue of Gucho.”
More reporting by Stephen Morris in London