China Renaissance plunges on trade resumption as star dealmaker's absence clouds prospects

By Selena Li and Donny Kwok

HONG KONG (Reuters) -China Renaissance shares plunged as much as 72% on Monday after ending a 17-month suspension triggered by a probe involving the boutique investment bank's former CEO and star dealmaker Bao Fan, with recent losses weighing on its outlook.

The sell-off erased as much as HK$3 billion ($385 million) in market value and pushed the stock to a record low. The resumption in trading came after China Renaissance published its long-overdue financial results last week.

The firm sent shockwaves through the country's financial sector in February last year when it announced it was unable to contact Bao, who founded the bank in 2005 with two other men and still owns nearly 49% of the company's issued shares.

Trade in China Renaissance shares was suspended in April 2023 after the bank delayed publication of its audited annual results as a result of mainland Chinese authorities taking away Bao to cooperate with an investigation.

A Chinese financial publication reported in May last year he was detained by disciplinary and supervision officials. Authorities have so far not provided any explanation for his absence.

China Renaissance last week posted an attributable loss of 471.9 million yuan ($66.55 million) for 2023, and a loss of 73.8 million yuan for the six months ended June 30, according to its Hong Kong exchange filings.

With Bao not seen publicly since the bank's disclosure in last February, his absence from the business caused mounting concern among staff and clients about the firm's future, Reuters reported in February, citing sources.

The bank's declining revenue and a weaker listing pipeline in China amid slowing economic growth are forcing investors to sell the stock, said Kenny Ng, securities strategist at China Everbright Securities International.

"Uncertainties around ongoing investigation involving Bao and management reshuffle point to a long road ahead before business can truly reboot."

The bank in February appointed co-founder Xie Yi Jing to replace Bao as CEO and chairman. Bao's wife Hui Yin Ching was named as a director last week.

SLUGGISH MARKETS

Shares in China Renaissance pared some losses in the afternoon trading session, but were still down 67.8% on the day, compared to a 2% drop in the benchmark Hong Kong market index.

Bao is one of several high-profile executives in China - most from the finance industry - who have gone missing in recent years with little explanation amid a sweeping anti-corruption campaign in the world's second-largest economy.

Bao, who previously worked at Credit Suisse and Morgan Stanley, was involved in the mergers of ride-hailing firms Didi and Kuaidi, food delivery giants Meituan and Dianping, and travel platforms Ctrip and Qunar.

China Renaissance said in its first-half report that despite "all kinds of difficulties and challenges" and a "sluggish" market environment, it "ushers in a new era" following the recomposition of its board.

The bank employed 521 people at end-June this year, the report showed, down 30% from the end of 2022.

Everbright's Ng said China Renaissance specialised in helping China's new economy companies tap public markets for capital raisings, but the shrinking listing pipeline had dimmed the bank's prospects.

($1 = 7.7959 Hong Kong dollars)

(Reporting by Selena Li and Donny Kwok; Additional reporting by Julie Zhu in Hong Kong; Editing by Sumeet Chatterjee and Jamie Freed)