Hong Kong Bourse Needs Stronger Watchdog

Champion of small investor interests David Webb is trying to find more support for his efforts to act as a watchdog against corporate greed and malfeasance. His latest attempt is to back two candidates, Bob Bunker (new) and Bill Kwok (incumbent), to run for election/re-election as board members of the Hong Kong bourse, according to this news report. If he succeeds, he will have three other co-board members as allies out of a total of thirteen, six of which are government-appointed.

What strikes me as odd in the news report is this statement: “There is no doubt that a bourse vulnerable to overseas influence is the last thing the government wants to see even though it maintains that whatever it does regarding the upcoming election will comply with normal procedures.”

I wonder if this is the position that government takes. If it is, then I am at a loss as to what it means by “overseas influence”. What is clear to me is that both Webb and Bunker are foreigners, and so is Christine Loh, another of Webb’s allies, (who may as well be considered a foreigner too for being married to one). Do they represent “overseas influence”?

Since when has xenophobia hijacked the official mentality? Hasn’t it always been the aim of the SAR government to let Hong Kong shine through as one of the leading international financial centers? How is “international” incompatible with “overseas”? Is government so hypocritical that while welcoming international investors to come and invest in Hong Kong’s stock market, it nevertheless wants to strip them of the right to representation on the stock exchange board?

Could it be that the true intention of the SAR government is to try to keep the operation of the monopolistic bourse from the watchful gaze of the international community as much as possible, by discouraging foreigners, especially pro-small shareholder and pro-corporate governance ones, from joining the board? That it really wants to go back to the days of private-club style of operation?

Even in the eventuality of a merging of the Hong Kong and Shanghai bourses (which is no more than pure speculation at the moment), foreign participation in the management of the new entity cannot be anything but positive given the financial expertise, experience and know-how that Western professionals possess, not to mention their relatively high standard of professional ethics and intolerance for corruption that sets them up as a much needed beacon.

There is nothing wrong with seeking cooperation opportunities with mainland organizations, but it would be a deadly faux-pas if Hong Kong gave up her single most important competitive edge relative to other mainland cities – her international status and connections. What bigger irony would there be than the prospect of a more and more open China vis a vis a more and more parochial Hong Kong?

Given the past track record of Webb, I believe that the shareholders of HKEx will trust his good judgment in backing the two named candidates. Having said that, the all-powerful SAR administration is of course at liberty to name its own pawn, which, if put in place, would further tighten its grip on the already reined-in public body board.