Chow Chung-Kong, former chief executive officer of subway operator MTR Corp., was named chairman of Hong Kong Exchanges & Clearing Ltd. (388) and declared he would capture opportunities for Asia’s biggest bourse.
The 61-year-old, who oversaw the MTR’s merger with another train company and expansion overseas, replaces Ronald Arculli, 73, who stepped down after a maximum consecutive six years on the job. Chow has also been CEO of Australian pallet provider Brambles Ltd. and non-executive director for Standard Chartered Plc. His initial term is for two years.
Hong Kong Exchanges was surpassed as the world’s biggest bourse operator by CME Group Inc. amid global competition from alternative venues and as large initial public offerings from China slow. The exchange has accounted for 5.5 percent of world IPOs this year compared with 13 percent in 2011 and 18 percent in 2010, according to data compiled by Bloomberg.
“Chow is quite qualified for this new role, having had experience with diverse global and multinational companies,” said Sandy Mehta, chief executive officer at Hong Kong-based Value Investment Principals Ltd. “With MTR (66) he is imminently familiar with local China issues and managing ‘on the ground’ in Hong Kong. While he hasn’t operated a financial sector company before, his long association as a board member of Standard Chartered gives him strong credentials and certainly stature and contacts for his new role at the exchange.”
Chow, whose appointment requires formal approval from Hong Kong CEO Donald Tsang, said the bourse “will listen carefully to market participants, particularly those in Hong Kong to capture opportunity for the exchange.
“Hong Kong Exchanges is very much an integral part of the international financial center of Hong Kong,” he told reporters after a board meeting in the city today.
Chow has good credentials though lacks financial experience, said Steven Leung, Hong Kong-based director of institutional sales at UOB-Kay Hian Ltd., a brokerage in Singapore.
Hong Kong Exchanges shares were unchanged at HK$127.70 at the close, while the benchmark Hang Seng Index rose 0.3 percent.
Chow was appointed April 10 as a director of the exchange for two years along with Timothy Freshwater, a former vice chairman for Goldman Sachs Group Inc.’s Asian unit. Arculli was re-appointed to the board for one year. Of the 12 non-executive board members, six are appointed by the city’s government.
“Chow’s track record with the MTR and management skill has been quite good, and he successfully managed public expectation on the MTR operations, so he’s the right candidate to be chosen by the government,” UOB-Kay Hian’s Leung said before the vote. “His weakness is that he doesn’t really have any experience in the financial field or relationship with the industry.”
During Chow’s tenure at the MTR, where he retired on Dec. 31, the company merged with another Hong Kong railway operator and started work on a HK$66.9 billion ($8.62 billion) connection to China’s high-speed-rail network. MTR also expanded operations to London, Stockholm and Melbourne, and last month reported a 21 percent increase in underlying profit for 2011 from a year earlier.
Hong Kong Exchanges under Arculli attracted large international listings, including luxury goods makers Prada SpA (1913) and L’Occitane International SA. The bourse’s share price more than doubled to HK$128.80 on April 20 from HK$56.55 on April 27, 2006, when Arculli became chairman.
Growth has slowed, with the bourse reporting a 1 percent increase in net income in 2011 as IPOs declined and trading volume slumped amid Europe’s debt crisis and efforts by China to cool its economy.
At $17.8 billion, Hong Kong Exchanges’ market value is second in the Bloomberg World Exchanges (BNWEXCH) index behind CME Group, which is valued at $18.1 billion. The Chicago-based derivatives venue became the biggest exchange company on March 19, data compiled by Bloomberg show.
Chow “certainly has the capability, experience and vision to be part of the whole Hong Kong board, even to the point to lead the board to the next plateau,” Vincent Lee, an elected board member of the Hong Kong Exchanges and chairman of brokerage Tung Tai Securities Co. said before the decision. “To be a good chairman, he doesn’t need to be a specialist. I look forward to working with him.”
Jockey Club, Knighthood
Chow, like his predecessor, was born and raised in Hong Kong. He has also been involved with the city’s Jockey Club as a steward since March last year. Arculli was chairman of the organization.
Knighted for “services to industry” in 2000, Chow’s award was gazetted on the same day as those of actor Sean Connery and Virgin Group Ltd. founder Richard Branson.
“My wife and a friend that I had invited to the ceremony were quite excited,” he said. “I thought they were excited to see me receive the knighthood, but in fact it was to see Sean Connery. They were disappointed when he decided to receive the knighthood in Scotland.”
While Arculli was behind attracting companies from Prada and L’Occitane to resource giants Vale SA and Glencore International Plc, bourse CEO Charles Li has also strengthened ties to China.
The exchange hosted the first yuan-denominated IPO outside of China last year and plans to start offering yuan currency futures in the third quarter. The company will spend HK$3 billion ($386 million) on technology upgrades over three years to boost trading speeds, expand its derivatives business and offer connections to mainland Chinese markets.
Chow declined to comment today on speculation the bourse may bid for the London Metal Exchange.
The exchange is seeking an acquisition loan to back a possible bid for the LME, two people familiar with the matter said on April 12. “Urgent action” is required to build businesses in financial derivatives and commodities to meet its goal of being a comprehensive financial center for China, the bourse said in its earnings statement on Feb. 29. Arculli declined to comment when asked if the bourse is bidding for overseas exchanges at the annual general meeting yesterday.
“The future of Hong Kong, and the exchange, lies in the combination of China’s high growth and rising economic power and Hong Kong’s long history of international connection,” Chow said April 12. “That’s the combination that will propel the city forward.”
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