GLMS SEC: Brokerage Sector Supply-Side Reform Expected to Accelerate; Industry Retains Upside Potential if Market Beta Rises

Stock News12-18

GLMS SEC released a research report stating that regulatory policies are guiding brokerages toward capital-intensive development while encouraging mergers and acquisitions (M&A) to strengthen market players. Against the backdrop of widening profitability divergence in the sector, the firm believes the supply-side structural reform of brokerages is poised to accelerate. It also anticipates a surge in M&A cases among leading brokerages by 2026. Currently, the PB valuation of the brokerage sector remains near historical lows. With recent policy tailwinds, market sentiment is expected to recover, warranting close monitoring of trading volume and index rebound sustainability. If market beta turns upward, the sector still holds upside potential. Key takeaways from GLMS SEC’s report are as follows:

**Event**: On December 17, 2025, China International Capital Corporation (CICC), Dongxing Securities, and Cinda Securities jointly announced a share swap absorption merger plan. The stocks of all three companies will resume trading on December 18, 2025.

1. **Merger Ratios**: The swap ratios for Dongxing Securities and Cinda Securities to CICC are set at 1:0.4373 and 1:0.5188, respectively. The transaction involves CICC absorbing Dongxing and Cinda via share exchange. The swap prices for CICC and Cinda are based on their 20-day average trading prices prior to the pricing benchmark date, while Dongxing’s price includes a 26% premium. Specifically: - CICC’s A-share swap price: RMB 36.91/share - Dongxing’s A-share swap price: RMB 16.14/share - Cinda’s A-share swap price: RMB 19.15/share This translates to 1 Dongxing A-share exchanging for 0.4373 CICC A-shares and 1 Cinda A-share for 0.5188 CICC A-shares.

2. **Cash Exit Option**: Dissenting shareholders may exercise a cash exit right. The offer prices are: - CICC A-share dissenters: RMB 34.80/share - Dongxing A-share dissenters: RMB 13.13/share - Cinda A-share dissenters: RMB 17.79/share

**Post-Merger Strengths**: This deal follows Central Huijin’s acquisition of stakes in the three AMCs in February 2025. The merged entity, still controlled by Central Huijin, aims to leverage complementary business strengths. Pro forma net assets would total RMB 171.5 billion (9M2025), ranking fourth industry-wide—a five-spot jump for CICC.

- **Branch Network**: Post-merger, CICC’s outlets will expand from 245 to 436, bolstering regional competitiveness in Fujian (Dongxing’s stronghold) and Liaoning (Cinda’s base). - **Client Base**: Retail clients will surge from 9.72 million to over 14 million, enhancing customer acquisition and service capabilities.

The integration is expected to significantly scale up the new entity’s assets and sharpen its competitive edge.

**Risks**: Slower-than-expected market recovery; delays in M&A progress; policy shifts.

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