By Alun John
Charles Li will step down as head of the Hong Kong stock exchange by October next year, the bourse said on Thursday, kick-starting a search for a successor with his ability to balance the wishes of international institutions, local players and Beijing.
Dubbed by some as Mr China, the boss of Hong Kong Exchanges and Clearing (HKEX) built ties with Chinese mainland markets, attracted major companies to the bourse and oversaw the 2012 acquisition of the London Metal Exchange, though last year's failed bid for the London Stock Exchange (LSE) removed some of the gloss from his 10-year reign.
The decision to flag his planned departure was unrelated to the failed $39 billion LSE bid, Li said as HKEX reported a 13% drop in first-quarter net profit, underperforming rival Asian exchanges after investment losses outweighed higher trading fees.
New listings and the 2014 launch of Stock Connect, which links Hong Kong with the Shanghai and Shenzhen bourses, have provided a hefty boost to trading on the Hong Kong exchange during Li's tenure, though volumes were dented by the anti-government protests in Hong Kong last year.
The pace of reforms has also slowed in recent years, with plans for other China-linked products including derivatives based on onshore Chinese shares seemingly stalled.
One of the longest serving exchange CEOs globally, Li is well known for his colourful metaphors, comparing the bourse to everything from a wolf pack to a poorly armed traffic cop.
He described HKEX's bid for the LSE as a "a corporate tale of Romeo and Juliet".
Last year he netted about $21.4 million by selling roughly half of his HKEX shares.
HKEX said Li would step down from as CEO in October 2021, at the end of his current term, or earlier if a successor is appointed before then. The company has appointed a committee to find his successor, it said.
Li's departure, however, raises questions around succession planning and HKEX's strategic direction, Citi analyst Tian Yafei wrote in a research note.
"However, should a new CEO who could build long term goodwill with mainland regulators be appointed, some of the pending initiatives could be approved," Tian added, referring to the previously planned reforms.
The company's first-quarter profit fall is in contrast to results from rivals including the Singapore exchange, where profits have risen on the back of higher trading volumes.
HKEX's net profit dropped to HK$2.26 billion ($291.6 million) even as headline average daily trading turnover jumped 20% amid high market volatility triggered by the coronavirus pandemic, pushing up trading fee income by 45%.
The gains, however, were outweighed by a HK$47 million loss on investments, compared with gains of HK$882 million a year earlier, hit by a market rout as the pandemic spread.
Stock Connect achieved record turnover in the first three months of the year in terms of international investors buying mainland China-listed shares and mainland investors buying Hong Kong-listed shares.
(Reporting by Alun John; Additional reporting by Twinnie Siu; Editing by Andrew Cawthorne and David Goodman)