Following is the transcript of a CNBC interview with Ronald Arculli, Chairman of FWD Group and Former Chairman of HKEX. The interview was broadcast on CNBC on 24 April 2017 at 09:00AM SG/HK Time, during CNBC's "Hong Kong versus Singapore" theme week.
All references must be sourced to a "CNBC Interview".
Interviewed by Bernie Lo, Anchor, CNBC and Oriel Morrison, Anchor, CNBC.
Bernie Lo: Things have changed quite dramatically, you know. We recently had Guotai Junnan Securities that was good to see that happen but the thing I noticed is that before that happened, the month leading up to that, it was actually... definitely quiet. A lot of businesses had dropped off quite a bit. I know exchanges around the world are kinda going through a lot of soul searching. What do they want to be? What do they want to be ruled by? Do they want to act to the demands of a lot of these companies that want to list. Should we be doing that sort of thing in order to be home to those markets?
Ronald Arculli: I think one of the challenges in any stock exchange, and Hong Kong is no different, is that in terms of the different businesses and perhaps the different expectations of different markets, Hong Kong, obviously, over the years have, as it were, looked at the situation and see whether we should try and be all things to all people or whether at the end of the day, a little old fashion might be the order of the day. So I think this theme keeps recurring, coming back ever so often.
Bernie: Our options are not binary though. We don't have to be either one vote... One share one vote, so full democracy and action or be all things to all people and be a free for all. I mean we could determine, you know, what kind of companies do what here, make what concessions actually are worth it in terms of getting those listings here, getting that sort of market capitalisation and that kind of attention focus back on our markets again. There are in-betweens right?
Ronald: There are, definitely, in-betweens. But also in terms of you know the maturity and sophistication of the market that we serve, you know, does that allow for a system like they have in the U.S. where buyers beware, everything is disclosed. And off you go. There are of course even critical voices about the American system of you know, different voting structure for corporate structure. And there are pluses and there are minuses obviously.
Oriel: From your perspective, and you have a very unique perspective when it comes to the financial markets, what do you think that Singapore has, that Hong Kong doesn't?
Ronald: ASEAN, in one word. I mean when you look at the ASEAN group, they generally tend to accept that Singapore, as it were, is a guardian of their group. Particularly when it comes to financial markets as each of the nations around it grow in maturity and sophistication. So Singapore has that great advantage, I think, over Hong Kong. Rather like Hong Kong has the advantage over Singapore in greater China or North Asia.
Oriel: Singapore, when you talk about ASEAN, there is an effort at play at the moment to bring ASEAN closer together with the ASEAN passport. However, you can't get around the fact that it is still a very fragmented region, a lot of different regulations in different countries. So surely on one hand it is a huge positive that Singapore has ASEAN, but also on the other hand, it can be a negative.
Ronald: But I think if you look, if you fast forward say to five, ten, fifteen years. On a five year horizon, I mean the level of sophistication in each of these markets is growing and they're learning very fast because of economic development and so on and so forth. So you put together a very large population, a very young population, you have 250 million in Indonesia, Thailand, Vietnam, you know, Philippines approaching a hundred million. That's a lot of people.
Bernie: Even in this day and age and it's been somewhere in the neighbourhood of 24 years, a quarter of a century since china started its stock market experimentation. I still feel in some ways, we're still testing the grounds each time with mainland companies. Companies come and list and they're still the exception, fortunately, rather than the rule. But six months later, nine months down the line, companies run into trouble, book keeping runs into trouble. Auditors start having problems, they make the news for all the wrong reasons and then they get halted from listing. It's like, every time I see stories like that happen here, I tell myself, where was all the due diligence? Isn't all these things, stuff should have happened a long, long time ago? Why do we keep going through the same hoops, the same hurdles, the same problems in Hong Kong? Why is that?
Ronald: I imagine, you know, in every market you get the odd rogue, if I could put it that way. And you'll try and see a professional advisors try to do. Unless you really roll up your shirt sleeves and make physical sort of inspection, literally, that might help reduce it but might not get rid of it entirely. So I suspect there are a fair bit of due diligence in that area anyway. But when you have such a large economy growing at the rate of knots the governance or the very.. We assume to be the basic things in the rest of the world as well as Hong Hong, I mean it's not a given in developing and emerging markets.
Bernie: Have we gotten it right in terms of fiduciary regulations here in Hong Kong? I mean the responsibilities of under writers, book builders and those people, when it comes to actually introducing listings and bringing companies to the capital markets. I mean we went through that debate for the longest time. Do we seem to have the right formula now?
Ronald: Well I think we are moving, definitely, very much in the right direction. But at the end of the day, whatever rules you make, wherever you put the responsibilities, at the end of it, it still comes down to cooperation between the professionals that are involved and the regulators. So if you over regulate, you will tend to kill the market. And therefore... And also access to different markets by the regulators. Which I think right now, China is in quite a good spot because, you know, she is definitely a member… of IOSCO and it's represented in different, sort of professional and recognised global regulatory bodies. So you know, from that perspective, you know, from the governmental point of view, they're definitely having a great impact and participating in all that governance structure out of G20 etc. And all that.