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HK Exchange CEO Charles Li to step down, adding to rising headwinds

HONG Kong Exchanges & Clearing Ltd CEO Charles Li said he's stepping down after 10 years, adding his departure to the rising challenges for the bourse at a turbulent time for the financial hub.

The 59-year-old will continue to lead the exchange until his contract expires in October next year, or leave earlier if a replacement is found, according to a filing. HKEX chairman Laura Cha praised his leadership and thanked him "for giving us as much time as possible to ensure a smooth transition". Mr Li doubled revenue since taking over, earning the moniker "Mr China" for tying the bourse closer to the mainland.

Still, a failed bid to takeover the London Stock Exchange last year stands as a misstep. The Asian exchange now faces mounting headwinds with political unrest and a deep economic slump in its home city. A push by China to build up its own exchanges is a challenge to Hong Kong's role as the main financing hub for Chinese companies.

"He has done very well in building our foundation," said Christopher Cheung, a lawmaker for the financial services sector. "His leaving will certainly bring a shock to HKEX in this turbulent time, with unfinished tasks to lure US-listed Chinese stocks to come back to Hong Kong, and the challenge from Macau to develop a financial centre."

A former banker, Mr Li has championed several key market reforms as well as pursued acquisitions. Before falling short in his attempt to buy the LSE in 2019, he engineered a deal for the UK capital's metal exchange in 2012.

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He was instrumental in linking the exchange with bourses in Shanghai and Shenzhen, allowing stock trading with the mainland, a programme that now contributes about 10 per cent of its revenue.

The shares have returned 8 per cent a year since he took over, almost double the return on the city's benchmark index. HKEX shares dropped as much as 4 per cent on Thursday in Hong Kong.

The bourse on Thursday reported a 13 per cent drop in net income to HK$2.26 billion (S$413 million), missing an estimate of HK$2.77 billion. Still, core revenue rose 19 per cent amid a trading boom and it retained its top spot globally for the number of initial public offerings. The severe market turmoil drove its investments into the red.

But trading is already cooling. And as volatility fades, there could be a "sharp reduction" in revenue and earnings for the exchange, Goldman Sachs Group Inc said in a report last month. Declining volatility and reduced income from investments will be "double headwinds for revenue" this year, the US bank said.

China's increasingly assertive stance towards Hong Kong is raising doubts about the exchange's push to expand its landmark Stock Connect programme, which allows trading of stocks between the city and Shanghai and Shenzhen.

Mr Li said in February that one needs to "be realistic" on expecting progress on big market initiatives due to the Covid-19 outbreak.

One sticking point is whether to include in the Stock Connect shares like Alibaba Group Holding Ltd, which are dual listed and allowing weighted voting rights.

The programme delivered record revenue for the exchange of HK$404 million, up 74 per cent from a year earlier as both northbound and southbound trading jumped to all-time highs.

Born in Beijing, Mr Li grew up in the north-western Gansu province during the Cultural Revolution. He worked on an oil rig and then studied English literature in China and later earned a law degree at Columbia University. A few years of working at law firms, were followed by 16 years in banking: first at Merrill Lynch & Co and then JPMorgan Chase & Co, where he was China chairman when he joined HKEX in 2009. BLOOMBERG

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