Hong Kong’s stock market has had a rollercoaster ride following Beijing’s abrupt announcement that a national security law would be imposed on the territory. The city’s benchmark Hang Seng index took a dive on the shock of the unsolicited legislation by the Chinese parliament when the news of it broke at the end of May. But an emerging bonanza soon rushed to the rescue, amid a frenzy of activity by mainland Chinese tech giants wanting to float on the local bourse.
Against this backdrop, Hong Kong Exchanges and Clearing Limited chairwoman Laura Cha said her extended tenure covering the next two years would be “eventful,” when she took questions from reporters upon her reappointment as the chief of HKEX last month.
The reappointment of the respected financial veteran, who had served both Hong Kong and mainland China’s securities watchdogs and now sits on the board of HSBC Holdings, is seen as reassuring for local and overseas investors amid the economic and geopolitical headwind, as Cha is a safe pair of hands and a respected name in the city’s financial scene.
Ronald Arculli, Cha’s predecessor at HKEX, said that with her at the helm of the bourse and Hong Kong’s financial sector, “Asia will not see a second financial center rising elsewhere.”
Cha, a barrister by training, was deputy head of Hong Kong’s Securities and Futures Commission for over a decade. Her outstanding work impressed China’s then premier Zhu Rongji. The reformist invited her in 2001 to take up the post of deputy chair of China’s Securities Regulatory Commission, making her the first ever overseas Chinese to become a vice-ministerial official in the Chinese government.
Her three-year stint in Beijing saw sweeping law enforcement and prosecutions to cleanse Chinese listed companies of accounting fraud and insider dealings, and her drive to eradicate rampant financial irregularities did not spare state-owned enterprises. Cha’s cleaving to rules and transparency and her efforts to take on big firms earned her the nickname “Iron Lady.”
Cha took up the cudgel as the chief of the Hong Kong bourse in 2018 and her tenure extension at one of the city’s most crucial junctures is being compared with that of Ashley Alder, chief executive officer of the city’s Securities and Futures Commission.
Alder has been leading the watchdog since 2011 and his contract, expiring later this year, was extended last month for another three years. It was revealed that Beijing played a role in retaining the respected SFC chief executive to help shore up investor confidence and that Cha’s extended chairmanship at HKEX could also be in line with Beijing’s imperative to preserve and reinforce Hong Kong’s standing as the security law looms.
On Thursday, Chinese Deputy Premier Liu He, President Xi Jinping’s point man on trade and finance, struck a reassuring tone in a prerecorded speech at Shanghai’s Lujiazui Financial Forum. Liu reiterated that the central authorities would strive to protect Hong Kong’s financial center status as well as the interests of international investors in the city.
Whether investors are convinced could be a moot point. In recent interviews with local, mainland and overseas media, the HKEX chief has been talking more about politics than stocks.
While owning up to the fact that even a well-connected financial and legal luminary trusted by Beijing like herself had also been kept in the dark until Beijing dropped the bombshell about the new security law at the National People’s Congress meeting last month, Cha was quick to side with Beijing and the city’s government to voice support. She added that even though the specifics of the new law are yet to be set out, it would restore stability and business confidence in the protest-riven territory.
The legislation, still being crafted by the NPC, would outlaw subversion, secession, terrorism and foreign interference in the former British colony, and the initial response from the market, reflected by the Hang Seng index, was largely negative. Much of the consternation centers around Beijing’s overreach and encroachment on the independent judiciary and personal and business liberty.
But Cha, once a NPC deputy for a number of years, argued that each country has laws safeguarding state security and the key is for the new legislation to be drafted with the prerequisite not to jeopardize Hong Kong’s rule of law, fair and transparent markets as well as its level playing field.
Cha, also a member of the Executive Council, the cabinet of the city’s top leader, added that Beijing had already assured that the law would only be used to go after “an extremely small bunch of radicals and their fringe political outfits” and that the overwhelming majority of Hongkongers and investors would not be affected by the move.
When asked whether local and international businesses would have to pledge allegiance to Beijing in order to continue to operate in the Asian financial hub, like how HSBC was pressured into chiming in with Beijing’s call for support for the new law, Cha, the British lender’s non-executive deputy chair, merely said companies operating in multiple jurisdictions would often find it difficult to navigate the current geopolitical environment but all enterprises would need a stable environment to operate in.
While Beijing’s seemingly unilateral move to foist a law upon Hong Kong has further compounded tensions with Washington, the animosity simmering between the two powers may have become a blessing in disguise for the Hong Kong bourse. Facing the potential of being banished from the United States when tougher reporting and disclosure rules kick in, HKEX’s listing vetting division is now overflowing with applications as Chinese tech firms seek an alternative market that is more accommodating and closer to their home.
Following Alibaba, NetEase stated trading in Hong Kong last month and JD.com also listed on HKEX’s main board this Thursday. Baidu is also in the IPO pipeline. At a recent general meeting, Cha said she was confident that HKEX would remain in the top spot of global IPOs this year.
And, she is also relishing the latest triumph in Hong Kong’s long-running rivalry with Singapore.
When news broke of Beijing mulling a security law for the city, HKEX poached MSCI’s licensing suite off the Lion City in a landmark deal hailed as a morale booster. A suite of 37 MSCI Asia and Emerging Market equity index futures and options contracts will be traded on the Hong Kong Futures Exchange, a subsidiary of HKEX.
In a statement, the Hong Kong government said the partnership would reinforce the city’s position as a pre-eminent risk management center and derivative hub in the Asia time zone and signify the market’s confidence in the city going forward.
Cha said the deal would help HKEX to diversify its predominantly equity focused product line and that these futures and options would be launched one by one by the end of the year.
The latest breakthrough has also largely erased the ignominy the Hong Kong bourse endured in October when the London Stock Exchange slammed the door in HKEX’s face as the latter tried to broker an acquisition deal.