New boss faces tough old challenges

Hong Kong Exchanges and Clearing's announcement that chief executive Nicolas Aguzin will be replaced by Bonnie Chan Yi-ting - currently the bourse's co-chief operating officer - has put an end to speculation over Aguzin's future.

The announcement helped clear the air during a difficult time in which speculation would have been most unwarranted.

Investors hate ambiguity.

Prior to the statement, it had been reported that many HKEx board members were inclined not to extend Aguzin's tenure after it ends in May 2024 due to the bourse's performance since he took over the top role from Charles Li Xiaojia in May 2021.

Sources were also cited as saying that Aguzin might have his contract extended by a year since HKEx chair Laura Cha Shih May-lung is due to retire in April and it would not be in the bourse's interest to see two top figures leave at the same time.

HKEx neither confirmed nor denied those reports.

The upcoming changing of the guard will restore the practice since the handover of naming a Chinese national as HKEx's chief executive and - for the first time - put a woman in the top executive role.

Under Aguzin, the performance of HKEx has been undesirable.

Though it would be unfair to blame him for constraints totally out of his control, anyone in such a senior position would be held responsible if a company's share and volume both plunged during their tenure.

The Hong Kong market has not only failed to catch up with its long-running competitors but has also lost out to some newcomers.

No one was surprised by the news of Aguzin's departure.

Chan's promotion - though ascending via internal promotion rather than a global recruitment exercise, as would have been expected - may be opening a new page for the Hong Kong market but she will face the same challenges that plagued Aguzin's term.

The unprecedented tension between the US and China remains the primary concern.

Although the Sino-US relationship seems to have stabilized somewhat, it has hardly improved.

Unless this relationship takes a dramatic turn for the better, the flow of American capital to the Hong Kong market will continue to be restricted.

The US Federal Reserve's prediction of three interest rate cuts in 2024 should improve the atmosphere of stock markets on the whole, but this may benefit Hong Kong's regional rivals, including India, more than the SAR.

Wall Street stocks are expensive. As money returns to securities amid interest rate cuts, it is expected to flow to destinations of high return potential and relatively low political risks.

Chan will have to be very innovative if she is to secure a share of this money flow.

And although the World Health Organization may have declared an end to the global pandemic alert, reports of epidemic outbreaks of a cocktail of diseases in the mainland could be a new factor that needs to be monitored constantly.

Facing Chan is a dynamic situation that cannot be overcome by technocrats alone but must be fixed at the root by politicians.