China Renaissance names new chairman

Xie Yijing will take over as the troubled investment bank’s head, as missing former chairman and CEO Bao Fan steps down ‘for health reasons and to spend more time with his family’

Key Takeaways:

  • China Renaissance’s shares could resume trading as early as March, after it named a new chairman to replace co-founder Bao Fan, who has been missing for a year
  • The company’s stock could fall 50% or more when trading resumes, reflecting not only concerns about Bao’s departure but also plunging business for Chinese investment banks


By Doug Young

After nearly a year of uncertainty, local investment bank China Renaissance Holdings Ltd. (1911.HK) finally seems set to move on to the next chapter of its unsettled story with its naming of a new chairman and CEO. That means the stock could finally resume trading after a nearly one-year pause, though it’s likely to undergo a major downward adjustment when that finally happens.

The company’s new chapter is seeing co-founder Xie Yijing take over as its chairman and CEO, according to an announcement to the Hong Kong Stock Exchange last Friday. Xie had been the company’s acting CEO after Renaissance’s high-profile co-founder, Chairman and CEO Bao Fan went missing last year, apparently to assist in an anti-corruption investigation.

In many ways, China Renaissance represents the story of China’s freewheeling homegrown investment banking and private equity industry, which boomed in sync with the country’s economy, and is now undergoing a painful correction with the current economic slowdown. The company was also touched by Chinese President Xi Jinping’s decade-old anti-corruption campaign that has recently focused on the financial sector.

China Renaissance was already starting to struggle as early as 2022 as China’s economy began to slow sharply after decades of explosive growth. That put a huge damper on demand for the investment banking services that are the company’s main business.

Reflecting the slowdown, new Hong Kong IPOs in 2022 fell 23% year-on-year to just 84, while funds raised from those listings plunged by more than half to just HK$100 billion ($12.8 billion). The numbers continued to sag last year, with new listings falling to 64 in 2023 through mid-December, while funds raised tanked to just HK$41 billion.

As business dried up, China Renaissance’s investment banking revenue fell by more than half in the first six months of last year from an already depressed figure a year earlier. Notably, those first-half results and the company’s annual results for 2022 have yet to be audited. That lack of an audit is the main obstacle preventing the company’s shares from resuming trading, though that looks set to change in the not-too-distant future with the naming Xie as the new chairman and CEO.

We’ll return to the potential trading resumption shortly. But first we’ll take a closer look at Bao’s disappearance, which is ultimately the main reason for the trading suspension.

Bao was first discovered “missing” last February, and later China Renaissance confirmed that he was assisting with an investigation. Such disappearances have become relatively routine as part of China’s anti-corruption crackdown, which frequently sees financiers like Bao detained to assist in investigations of bigger fish, often high-level government officials suspected of accepting bribes.

It was never really clear if Bao himself was being investigated for any wrongdoing. Several sources gave conflicting signals on that to financial media Caixin. Some said his resignation as chairman and CEO indicates he’s likely to face arrest, while others said he has been “released.”

China Renaissance’s latest announcement seems to indicate the latter is more likely, since it says Bao quit his posts “for health reasons and to spend more time with his family.” While such explanations are relatively boilerplate, Bao would hardly have much time to spend with his family if he was serving a long jail sentence.

Interestingly, the announcement also indicates that Bao will continue to have a voice at the company through Sun Chin Hung, or Sun Qianhong in Mandarin. Sun is listed as a “family member of Bao” and, at the young age of just 33, will become a non-executive director of the company, according to the latest announcement.

Road to trading resumption

All that said, we’ll spend the second half of this review looking at the road China Renaissance faces to a trading resumption, and how the shares are likely to fare once that happens.

China Renaissance can’t resume trading until its audited 2022 annual report and interim report for 2023 are both officially submitted to the stock exchange. That requires two key steps that were previously difficult or impossible, namely the sign-off on those reports by an outside auditor and also by the company’s chairman, namely Bao.

Bao’s replacement as chairman removes that significant obstacle to a trading resumption. The auditor issue is a bit more complex, since Deloitte Touche Tohmatsu officially resigned as the company’s auditor last December, and was replaced by Zhonghui Anda CPA Ltd., Renaissance disclosed at the time.

The resignation of a big name like Deloitte almost certainly points to disagreements between the auditor and company about its accounting for the two periods. That means the new auditor, Zhonghui Anda, will be under big pressure to closely scrutinize the last two sets of results, with the result that we could see some changes between the unaudited results the company previously released via the stock exchange and the final audited results.

Assuming Zhonghui began to work on its audit immediately after being named as the company’s new outside accountant on Dec. 13, it probably will require at least three to four months to reach consensus with the company and complete its final audit. Meantime, China Renaissance would also likely need to submit its preliminary, unaudited full-year results for 2023 by the end of next month.

All that means a trading resumption isn’t likely until March at the earliest, and more likely in April or May. China Renaissance’s stock initially tanked after word of Bao’s disappearance leaked out last February, and the stock was down about 30% from a recent peak at the time of the trading suspension. Hong Kong stocks have performed quite poorly since then, and the benchmark Hang Seng Index is down about 20% from the time of the suspension.

Before the trading suspension last April, China Renaissance shares had lost nearly 80% of their value since the company went public in 2018. A good comparison for the company is CICC (3908.HK; 501061.SH), another major Chinese investment bank whose shares have fallen by an even larger 42% since China Renaissance’s stock was suspended. That seems to suggest China Renaissance’s stock is almost certain to drop sharply when trading resumes, quite possibly by more than 50%.

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