It has been over a week since the chairman of a boutique investment bank went missing in China. finews.asia takes stock.

If nothing else, the announcement was as transparent as it could possibly be. 

On the 16th of February, China Renaissance, a boutique investment bank, told the Hong Kong Exchange that its board of directors was unable to contact its chairman, Bao Fan, who is also its chief executive and the controlling shareholder.

At the time, they said they were «not aware of any information» that indicated whether his «unavailability» was linked to the bank’s business.

Nothing Further

Since finews.asia first reported the disappearance, there has been no further news. It is now more than a week and both international investors and the media have had time to digest what is out there, which is not very much.

A number of articles claimed he was trying to set up a family office in Singapore (collated Google search results), ostensibly in an effort to skirt China’s restrictions on capital outflows. Others, such as «BBC», drew links to Renaissance’s former president Cong Lin, under investigation since last year for his role at major state-owned bank ICBC since last year.

Many maintained that his disappearance would undermine business confidence, and with that, investors. Some alluded to a renewed crackdown against mainland tech as Fan was a key rainmaker who had once worked for Credit Suisse and had brokered many of the country’s key deals, with «Bloomberg» (paywall) maintaining that even state lenders were surprised by the step.

Forgotten Roots

A mainland market expert who preferred to remain anonymous had his specific take on what had happened, saying that many people had forgotten how Bao, and Renaissance, became successful in the first place.

«There is a whole ecosystem of companies that benefited greatly from the previous lack of regulations in China. There were lots of loopholes and plenty of explosive growth,» the expert indicated. 

This is now changing and entrepreneurs will need to adapt to the new regulatory environment. The situation also reflects the advantage in transparency Hong Kong has compared with China.

«I mean if this happened in the domestic stock market, it would be swept under the rug as much as possible,” the same expert maintained.  

Taking a Toll

The truth is that no one knows what is going on and there is not all that much use in speculating. Fan’s disappearance has taken a toll on the bank’s shares, given they are off about 33 percent from their level at the end of January – before the announcement was made.

The broader-based Hong Kong Exchange indexes are also down, and selling significantly outweighs buying on the two connect stock trading schemes, although it would be hard to attribute that directly to China Renaissance.

In fact, maybe everyone is looking at this the wrong way around. 

Opportunity Cost

On a positive bent, at least the company disclosed the information, and the market knows something happened to Fan.

In fact, this may simply become a quasi-permanent opportunity cost for mainland equity investors, particularly those from overseas. Such events are also not limited to China. They can and will happen in places like Vietnam, Thailand, and even Malaysia, which is relatively democratic, unlike the others. 

Across the region, this won't be the last instance of its kind – and investors are going to have to get used to that.