The latest: Financial services firm China Renaissance Holdings Ltd. (1911.HK) on Tuesday warned it expects to post a net loss of 154 million yuan ($22.7 million) for the first half of the year, reversing a 1.23 billion yuan profit for the same period last year.

Looking up: In its bid to offset more challenging market conditions in the second half of the year, the company said it will continue to grow its investment management business and expand its fee-generating assets under management, and pivot towards new growth areas such as technology, new energy, and advanced manufacturing.

Take Note: The company’s swing to the red owed mainly to a decline in underwriting revenue as the size and number of IPOs in the U.S. and Hong Kong dropped sharply in the period due to market volatility. The company’s China Renaissance Securities (China) subsidiary also suffered from deteriorating investment income due to severe shocks in the secondary market.

Digging Deeper: Founded in 2005, China Renaissance has developed over the past decade into a leading Chinese financial services company, making private equity investments, as well as offering underwriting, asset management and brokerage services. It was listed on the Hong Kong Stock Exchange in 2018. The recent crackdown on U.S.-listed Chinese stocks by regulators on both sides of the Pacific has caused the number of Chinese IPOs in New York to drop sharply, hurting China Renaissance’s underwriting business. Its investment income has also decreased due to stock market volatility, which also caused its revenue to drop in the second half of last year. Its net profit of 396 million yuan in the second half of last year was 67.7% lower than the 1.23 billion yuan in the first half.

Market Reaction: China Renaissance shares initially fell sharply on Wednesday, though they later pared the losses and were down by a milder 0.8% at HK$8.81 at the midday break, close to their 52-week low.

Translation by Jony Ho

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