Chinese bank tries to reassure about missing star deal maker

HONG KONG, Feb. 20 (Reuters) – The disappearance of a top Chinese dealmaker has left his bank struggling to reassure customers and staff, experts said Monday, and has heightened concerns about “key man risk” for investors.

Shares of China Renaissance Holdings (1911.HK) fell as much as 5% on Monday, following a record low in the previous session after the investment bank said it was unable to contact its founder, chairman and CEO Bao Fan.

The stock ended the day up 0.1% on the Hong Kong market, which rose 0.8%.

While the reasons for Bao’s disappearance are unclear, his case follows a series of incidents in which top executives in China went missing without explanation during a sweeping anti-corruption campaign led by President Xi Jinping.

Some of them returned as abruptly as they disappeared.

China Renaissance said in a grant application Thursday that it had no information that Bao’s “unavailability” was related to his business and that his operations continued as normal.

China Renaissance co-founder Kevin Xie and Wang Lixing, head of the investment bank, who run the company in Bao’s absence, have asked staff not to believe or spread rumors, according to two sources and copies of their messages to the staff seen by Reuters.

“At such a critical moment, everyone should trust the company. Don’t worry and don’t stumble. It’s okay to run into some trouble in the short term,” Wang said in his message on the company’s Wechat group on Friday.

According to two sources and some media reports, authorities took Bao earlier this month to assist in an investigation of a former colleague, Cong Lin, the company’s former president.

All sources with knowledge of the matter declined to be identified due to its sensitivity.

A spokesman for Beijing-based China Renaissance declined to comment on specific details, referring Reuters to Thursday’s exchange request.

Xie and Wang did not immediately respond to Reuters’ requests for comment on Monday.

The Beijing Public Security Bureau also declined to comment. When asked at a daily press conference on Friday whether the banker had been detained, Foreign Ministry spokesman Wang Wenbin said he was unaware of the situation.

The Hong Kong-listed share, which rose as much as 3.5% early Monday, gave up all those gains and plummeted to a low of HK$6.82. It reached an all-time low of HK$5 on Friday, but later recovered some ground to close at HK$7.18, down 28%.

‘KEY MAN RISK’

Bao, also China Renaissance’s controlling shareholder, started the company in 2005 as a two-person team, seeking capital-hungry startups with venture capitalists and private equity investors.

The company later expanded into services including underwriting, sales and trading.

Bao was known to be well connected in the business world and was involved in tech mergers, including the merger of ride-hailing companies Didi and Kuaidi, food delivery giants Meituan (3690.HK) and Dianping, and travel platforms Ctrip (9961.HK). ) and Quanar.

“What happened with China Renaissance highlighted the key man risk in some Chinese companies,” said Li Nan, a professor of finance at Shanghai Jiaotong University.

“A group of Chinese financial institutions have risen rapidly in recent years thanks to the efforts of one or two controllers, while leaving these companies particularly vulnerable to negative headlines that show the controllers are in trouble.”

Key man risk generally refers to the threat posed to a company by over-reliance on a limited number of employees for decision-making.

While it’s not uncommon in China for authorities to take away business people for a variety of reasons, Bao’s disappearance comes amid more than two years of sweeping regulatory action against tech companies.

“This should once again remind foreign investors of the relative level of regulatory and governance risk associated with Chinese equities,” said Propitious Research analyst Wium Malan, who publishes on the Smartkarma platform.

Reporting by Julie Zhu, Xie Yu, Scott Murdoch, Donny Kwok and Selena Li; Written by Sumeet Chatterjee; Edited by Muralikumar Anantharaman, Robert Birsel and Barbara Lewis

Our Standards: The Thomson Reuters Principles of Trust.