Renaissance Capital, an investment bank specialising in emerging and frontier markets, may have been late arriving in Asia, but it is now clearly in a hurry to make its mark.
It opened its Hong Kong office in June 2010, and gained its Hong Kong regulatory licences on September 1. And, on Monday and Tuesday this week, it hosted 200 delegates at an inaugural two-day emerging market investor conference at the city’s Mandarin Oriental hotel.
Renaissance can add value for investors and corporate clients because of its “wide experience and deep knowledge of the natural resources sectors in Russia, the CIS [Commonwealth of Independent States -- a regional organisation of former Soviet republics], and Africa, which also gives [it] a unique insight into how Chinese firms operate and how they gain access to those natural resources,” Jeremy Sparrow, Renaissance Capital's Hong Kong CEO, told FinanceAsia in an interview.
The bank originally planned to open a Hong Kong office in 2008, but “due to market instability we postponed until 2010”, explained Sparrow. In the meantime, Russian oligarch Mikhail Prokhorov “gave a liquidity injection in 2009”, which left him with a stake of 50% minus one share in Renaissance.
The firm now employs 18 professionals in Hong Kong -- including six people selling CIS and African resources equities and five investment bankers -- and plans to increase the number to 35 by the end of the first quarter 2011.
“There is a scramble for mineral and energy resources throughout the world, as emerging and frontier economies take further, rapid steps towards industrialisation and urbanisation. That is the sector we focus on and in which we have unrivalled expertise,” said Sparrow.
Sparrow was previously head of equities and head of international sales at the firm’s London and New York offices, and has been a managing director at Renaissance since 2001. Earlier in his career, he had senior roles at Morgan Stanley and Paribas Capital Markets.
“I enjoy the challenge of building businesses,” he said, and reckons his posting in Hong Kong will be for five to six years. What he lacks in Asian experience, he makes up for with his understanding of Renaissance’s operations and its relationships with its clients in emerging and frontier markets.
A priority is to hire a China economist/strategist, and research teams for metals and mining, and for oil and gas. “We want to be clever in those sectors,” he said.
Sparrow described four main parts of Renaissance’s strategy in Hong Kong and Asia that build on the bank’s core sector and geographical strengths.
First, Renaissance intends to act as sell-side advisers to African companies and assets sought by Chinese and Indian firms, “which are in a fierce struggle for African assets”, he said. In order to help complete Chinese M&A deals, the bank is ready to open an office in Beijing. “Without a physical presence it is difficult to get connectivity in China, where building and maintaining relationships are so important.”
Second, Renaissance plans to be active in Hong Kong’s primary equity markets. It wants to advise and lead manage listings of non-regional companies in Hong Kong, especially those from Africa, central Asia and the CIS, following its participation in Rusal’s groundbreaking (if controversial) IPO in January this year.
Sparrow reckons that Renaissance is likely to bring three IPOs this year or early next year, and possibly up to 10 during the whole of 2011. These might include the first African company listing in Hong Kong, which he said “is an ambitious target, and if successful would represent a serious challenge to London’s pre-eminence [in that area]”.
Third, a necessary corollary of acting as bookrunner to primary listings in Hong Kong will be to provide a secondary market trading and sales service for investors. The bank will also continue to distribute other Russian and African equities to Asian accounts.
Finally, Sparrow argued that Renaissance’s base in Hong Kong will give it a great opportunity to raise secondary market capital for many Australian and Mongolian metals and mining, and oil and gas companies that the bank is already close to. Indonesia and its natural resources is also on his radar. The value of individual transactions are likely to range from $25 million to $100 million, which tend to be too small to attract much interest from the global bulge-bracket banks, Sparrow argued.
Renaissance started life as a Moscow-based investment bank and one of its founders, chief executive Stephen Jennings, remains responsible for its overall strategic direction. It has since expanded throughout the CIS, central Asia and sub-Saharan Africa, and has a worldwide support office in Cyprus. It has gained a reputation for the range and quality of its research in all those regions as well as in prominent investment banking transactions for companies involved in metals and mining, oil and gas, and agriculture.
The bank now intends to build up a franchise in Asia.
“Our conference and its success, means that we have stolen a march on our potential competitors,” said Sparrow.
Renaissance was able to persuade big names to set the conference in motion. Introductory remarks were made by Hong Kong’s financial secretary, John Tsang; Ronald Arculli, chairman of Hong Kong Exchanges and Clearing; Sergey Gritsay, consul general of the Russian Federation in Hong Kong; and by Jennings.
All of them highlighted the increasing integration of the emerging markets, and what Jennings called “the partial disintermediation of the West...[which] is rapidly breaking down historical trade, capital and political linkages”.
Company representatives from Russia, Nigeria, Kazakhstan, Mongolia, Mozambique, Guinea, Ukraine, Democratic Republic of Congo, Zambia, Kurdistan and India met investors from Hong Kong, mainland China, Singapore, the United States, Europe, Russia, Bahrain, South Africa, Australia and Vietnam.
Although the geographical origins of the companies were diverse, the nature of their businesses wasn’t. Natural resources, in particular oil and gas, minerals and metals, was the common theme.
The conference was tightly focused, but so is Renaissance’s regional strategy.
To read an examination of new trends in world investment banking, see "The rise of the super regionals" in the November issue of FinanceAsia magazine.