Chow Chung-Kong, the former chief executive officer of subway operator MTR Corp. (66) who was named to Hong Kong Exchanges & Clearing Ltd.’s board this week, said his fellow directors will decide if he is the next chairman.
Chow, 61, declined to comment in a phone interview yesterday on whether he has been approached or had discussions about assuming the position, which will be vacated this month when Ronald Arculli steps down after six years. Chow is the front-runner and has the support of the city’s government, which appoints six of the board’s 12 non-executive members, according to the South China Morning Post.
“I will leave it to the board’s vote,” Chow said. “I have been a CEO of major listed companies for 15 years. I understand how a listed company works and how it acquires capital from investors in the market. I understand the real economic function of an exchange.”
Chow, a knight of the British Empire who has also been CEO of Anglo-Australian pallet provider Brambles Ltd. (BXB) and non- executive director for Standard Chartered Plc, was appointed on April 10 as a director of the exchange. Timothy Freshwater, a former vice chairman for Goldman Sachs Group Inc. (GS)’s Asian unit, was also named to the board. Arculli was reappointed as a director for one year, the government said in its April 10 announcement. The appointments take effect at the company’s annual general meeting on April 23.
Board members will make the decision on April 24, according to Arculli, who declined to comment on who the next chairman will be. The board includes CEO Charles Li, a former China chairman of JPMorgan Chase & Co. and one-time editor at the state-controlled China Daily newspaper.
“The Hong Kong exchange needs to differentiate itself from Asian exchanges and to try and go and play with the big boys,” Arculli said from London yesterday, where he is attending a meeting of the trustees of the International Financial Reporting Standards Foundation. “And to some extent that probably also reflects the government thinking in the latest appointments.”
Hong Kong is seeking listings from more overseas companies as the pipeline of large IPOs from China slows. Companies from the mainland accounted for 58 percent of Hong Kong’s market capitalization at the end of March, according to the exchange.
Competition for stock offerings among operators of equity markets has increased globally amid declining profits on trading and competition from alternative venues. Hong Kong Exchanges lost its ranking as the world’s largest bourse operator by market value last month, overtaken by Chicago-based CME Group Inc. (CME)
Hong Kong’s government chooses half of the exchange’s 12 directors while shareholders elect the other six. That means the government is likely to get the chairman it wants, said David Webb, a former director of the exchange and operator of Webb- Site.com.
“They’re paving the way for CK Chow to be chairman,” said Francis Lun, managing director of Lyncean Holdings Ltd. and chairman of the Hong Kong Institute of Financial Analysts. “The government wants someone who will toe the government line and not rock the boat. He’s more of an administrator, a technocrat. I don’t think he will do much running of the company. They’re more figureheads.”
The Chinese city has accounted for 5.7 percent of global initial offerings this year compared with 13 percent last year and 18 percent in 2010, according to data compiled by Bloomberg. In recent years the exchange has attracted companies from Russia, Brazil, Switzerland, Italy and France.
“Mr. Chow has an international outlook,” Eddy Fong, chairman of the Securities and Futures Commission, told reporters in Hong Kong today. “He has lots of experience in financial management. He has worked in the U.K. and run some other large corporations. If the HKEx expands its business overseas, Chow’s experience will help.”
Shares of Hong Kong Exchanges & Clearing have risen 4 percent this year compared with a 12 percent gain by the Bloomberg World Exchanges Index. (BNWEXCH) The shares trade at 25.9 times estimated 2012 earnings, compared with the exchanges index’s 15 times.
“Given the government appoints six directors, moves in that population are less likely to cause drama than changes in the executive suite or day-to-day market news flow,” said Sam Hilton, a Hong Kong-based analyst at Keefe Bruyette & Woods Asia whose coverage includes Asian exchange companies. Hilton has a market perform rating on Hong Kong Exchanges shares.
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