JPMorgan banker Nicolas Aguzin has been picked to lead the Hong Kong bourse for three years starting from today. Photo: Handout

The Hong Kong Stock Exchange’s bid to recruit a foreigner as its new CEO has emerged as the latest test of the territory’s economic autonomy and receptiveness to foreign talent as Beijing tightens its grip. 

Several names came up in the rumor mill during HKEX’s global scout for a financial veteran since last year. The final pick, recently announced by a selection board, works across the street from the Hong Kong bourse’s head office in the Asian financial hub’s Central business district. 

Nicolas Aguzin, now JPMorgan Chase’s International Private Bank CEO and a permanent resident of Hong Kong, is set to take over as chief of Asia’s largest stock market in May for a term of three years. He replaces retiring CEO Charles Li Xiaojia, his former senior colleague at JPMorgan.

Aguzin can expect minimal hassle with the move to his new role at HKEX, now worth US$90 billion, as his old office in the American investment bank’s Asian headquarters building is just halfway down the bustling Connaught Road from HKEX’s cavernous trading floor.

Still, Aguzin’s appointment and the backlash from the city’s pro-Beijing camp and Chinese state media are a reminder that not even the financial sector is insulated from political heat these days. 

Nicolas Aguzin in a file photo. Image: Facebook

Aguzin appears to have all the credentials for the job. Hailing from Argentina, the 52-year-old banker has progressed through the ranks at JPMorgan after joining in 1990. He is also a citizen of the European Union and reportedly holds a Croatian passport. He was previously JPMorgan’s Asia Pacific chief where he steered the firm’s growth across China and the region.

Hong Kong’s pro-Beijing establishment and senior Chinese cadres up north overseeing the city’s affairs have, nonetheless, reportedly frowned upon Aguzin’s Western background and his illiteracy in Cantonese or Mandarin, despite the fact he has lived in the city for nearly a decade. 

Hong Kong’s pro-Beijing broadsheet Ta Kung Pao opened the first salvo over the weekend, with questions like why had HKEX not drawn on the massive talent pool of the city and mainland China during the year-long search. 

“Of course nationality should not be a determining factor but has HKEX poached or considered even better candidates for the job? 

“It is still baffling to see that in a city with 7.5 million residents and in China, the world’s second-largest economy of 1.4 billion people, the post of HKEX’s CEO has to be filled by a foreigner,” read an op-ed in the paper. 

In Beijing, the state-backed nationalistic tabloid Global Times said the appointment has been met with incredulity and that a leader with a Chinese background is essential for the “sustenance of HKEX’s role and future.” More compelling reasons must be given for appointing the first non-Chinese to lead the Hong Kong bourse since the city’s 1997 handover from London to Beijing, said the paper.  

These voices have fueled questions of whether Beijing may intervene to reverse the appointment. There are also legitimate concerns among HKEX stakeholders whether Aguzin, as an outsider, can build on the successes of Charles Li.

The mainland-born and US-educated Li will be a hard act to follow. His report card from his ten-year tenure at HKEX includes landmark breakthroughs such as the Shanghai/Shenzhen-Hong Kong Stock Connect and Bond Connect initiatives that swung open China’s massive financial markets. 

For the same reasons, Beijing and mainland investors understandably favor a Chinese candidate when more blockbuster IPOs of Chinese firms are in the pipeline in 2021.  

HKEX chairwoman Laura Cha speaks to media as outgoing CEO Charles Li looks on. Li has been described a hard act to follow. Photo: Handout

HKEX chairwoman Laura Cha, who led the worldwide hunt to fill the post, has rushed to Aguzin’s defense, calling him extremely well-placed with his broad experience in Greater China, the Americas and globally.

“Nicolas brings a wealth of international and regional experience in capital markets, including extensive knowledge of mainland China, having served as chief executive for JPMorgan Asia,” she said.

“His skills and expertise will help us drive forward our strategy, utilizing our deep China experience but also reinforcing our international reach and relevance,” Cha said in a press statement

She went so far as to suggest that even though the new CEO would have to rely on an interpreter to talk to Beijing officials and executives of mainland firms, which now account for roughly 75% of HKEX’s daily turnover, liaising with the mainland was not Aguzin’s sole responsibly. 

Cha hinted to reporters on Tuesday when opening HKEX’s first trading day in the Year of the Ox that her sound ties with Beijing would help oil the wheels when the bourse seeks deeper integration with China.

Cha was a deputy president of the China Securities Regulatory Commission between 2001 and 2004 at the invitation of then-premier Zhu Rongji. Her ability to push the appointment through the HKEX board stacked with Beijing loyalists is a sign of her determination and faith in Aguzin. 

Aguzin has also proven his insights into the Chinese market. In an interview in 2017, he talked up the prospects of China’s policy loosening to allow foreign capital to set up wholly-owned securities firms in the country.

Beijing ultimately delivered on its promise and pulled down regulatory hurdles last year and JPMorgan became one of the first foreign banks to own a securities firm in Shanghai. 

The flags of the Hong Kong Stock Exchange, China and Hong Kong are seen flapping in the wind. Photo: Anthony Wallace/AFP

Anthony Francis Neoh, former chair of Hong Kong’s Securities and Futures Commission (SFC), a high-powered market watchdog that will review Aguzin’s appointment, said the city’s top leaders may already have green-lighted the nomination despite the contention. SFC’s head Ashley Alder is yet to give his opinion. 

Observers say Hong Kong sees the pressing need to renovate its image as a time-tested financial hub amid doubts about its continuity in the wake of the social turmoil in 2019, which led to Beijing’s imposition of a national security law in 2020 to outlaw in broad terms acts deemed as undermining China’s authority.

Rising US-China tensions and Washington’s revocation of the city’s exclusive trade and economic privileges last year some fear could exacerbate what is perceived as an emerging capital and talent flight. 

The Ta Kung Pao newspaper noted in a separate editorial that “financial security is an integral part of national security and any gaping holes must be plugged and must not be created with management changes at vital institutions.”  

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