HKEX CEO Nicolas Aguzin spoke to The Jakarta Post's Aditya Hadi in Jakarta on July 26 about potential collaboration with IDX, the opportunity for local companies to be listed on the Hong Kong Stock Exchange and the future of special purpose acquisition companies (SPACs).

Question: How do you see Indonesia and the local stock exchange (IDX)?

Answer: I think it's an evolving, up and coming market. We clearly look at what's happening this year, including a lot of transactions that happened. It reflects what's going on in the country and the growth of the local ecosystem.

Particularly, when it comes to innovation, with all of the new unicorn [start-ups] that you're seeing in Indonesia.

Recently, HKEX has signed a memorandum of understanding (MOU) with IDX. Could you explain the content of the agreement?

There are three things. First, to make sure that we have a new product development together. It may be exchange-traded funds (ETFs) or structured products that we can leverage on each other.

Number two is cross-border listing, to the extent that there may be companies from both sides that have an interest in developing a platform in other regions. We want to harmonize the requirements and make it easier for companies to be [listed] on both exchanges.

And the third one is around the environmental, social and corporate governance (ESG) aspect. We launched a marketplace for a voluntary carbon credit in October last year. We'd love to find ways to leverage [IDX], as Indonesia has so much to offer in terms of sustainability.

Regarding cross-border listings, what kind of local Indonesian companies do you think are the prime targets for the Hong Kong stock market?

Mainly, “new economy” companies. All of those unicorns, such as digital and Web3 companies, they are the perfect thing.

In 2018, we introduced new listing rules to accommodate new economy firms such as pre-revenue biotech companies and those set up with a weighted voting rights structure. Since then, a new economy ecosystem has been built up in the Hong Kong market and we welcomed over 260 companies. Today, 25 percent of our trading activity is actually contributed to by those new economy firms that are listed after 2018.

Among them, there are about 120 biotech companies that raised around HK$270 billion (US$34.6 billion). All of a sudden, we became the second largest international biotech fundraising hub in the world after the New York Stock Exchange.

On top of that, companies in Indonesia that have aspirations to become bigger, more efficient and more competitive by expanding overseas [also have potential for an IPO on HKEX].

This year we just changed a regulation to allow international companies that are listed on HKEX to be accessible by investors from Mainland China, for the first time ever. So, it's a great opportunity to raise capital from Chinese investors.

In your opinion, what is the biggest barrier for Indonesian firms to be listed on HKEX?

I don't think there is anything specific that has prevented companies from being listed on HKEX in the past. And it's not like all the companies went to other international bourses. The reality is that local companies have been listed domestically and stay for the most time.

I would expect that the companies [that aim to be listed internationally] will increase, and Hong Kong should be a market that companies are thinking about.

Local companies obviously could get some fiscal and tax advantages by being listed in Indonesia. On top of that, there is a necessity to translate everything from Bahasa Indonesia to English [for international listing]. In Hong Kong, we also need to translate into Chinese.

That's why we're exploring how we can have a better understanding and develop communication between senior levels in both exchanges to increase awareness.

Do you think it is necessary for companies that want to go public in HKEX to have a physical presence in Hong Kong?

The investors in HKEX are from around the world. Around 80 of the top 100 banks globally indeed have a base in Hong Kong, but the decision making is very distributed around the world.

There is a benefit of having a relationship with investment and research houses in Hong Kong, but it's not a must. It can work even without that.

Is there any effect of the geopolitical tension between China and the US on investors' appetites in HKEX?

There is a decrease in investments targeting Chinese companies. However, in terms of investments through Hong Kong, we still see a vibrant ecosystem.

So if the company is coming from Indonesia for example, [it's still considered] investment in an Indonesian company. The fact that you do it through HKEX doesn't matter.

What do you think of the future of SPACs?

SPACs are an alternative capital fundraising scheme that can be helpful for the market. That's why we launched our SPAC regulations last year.

However, if most of the market is raising money through SPACs, we have a problem. It means something is not working [with the traditional IPO scheme].

Thus, our target is to keep it at a small percentage, 10 percent at most. It also has to be in situations where you have high quality sponsors, not just "influencers" that just say "hey, I'm really good".

We also don't want that regime to be a way to avoid going through the regular listing rule. Thus, the requirements are pretty much the same.

So, I think we're not going to see SPAC activities similar to what we saw a couple of years ago.

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