China Securities Co., Ltd. (601066.SH) released a research report stating that China International Capital Corporation Limited (CICC, 601995.SH) has announced a plan to absorb Dongxing Securities (601198.SH) and China Cinda Securities (601059.SH) through a share swap. This merger, which involves no additional fundraising, positions CICC as the surviving entity.

The merger is expected to create significant economies of scale, with the three firms complementing each other in core competencies. CICC's prior successful integration of China Investment Securities suggests smooth execution this time. Post-merger, CICC's capital strength and regional service capabilities will leap forward, potentially lifting its mid-to-long term return on equity (ROE) and reshaping the industry landscape.

Key details of the merger: - On December 17, 2025, CICC, Dongxing Securities, and Cinda Securities disclosed the merger plan, with CICC’s shares resuming trading on December 18. - All three firms are under China’s "Huijin System" and headquartered in Beijing. The Ministry of Finance previously transferred stakes in the three AMC-affiliated brokerages to Huijin. - The share swap ratios are set at 1:0.4373 (Dongxing to CICC) and 1:0.5188 (Cinda to CICC), with Dongxing receiving a 26% premium over the benchmark price.

**Synergies and Competitive Edge** 1) CICC’s net assets are projected to surge by approximately RMB 56 billion to RMB 171.46 billion post-merger. With 2-3x leverage, this could expand its fixed-income business (including proprietary investments and FICC) by RMB 111.9–167.9 billion. 2) CICC’s 216 branches (as of 2024 data) are concentrated in Guangdong, Beijing, Jiangsu, and Sichuan. Dongxing’s 77 outlets (34 in Fujian) and Cinda’s 82 (33 in Liaoning) will fill regional gaps, particularly in Fujian and Northeast China.

**Industry Impact** The merger will create a top-tier brokerage rivaling industry leaders like CITIC Securities and Haitong Securities in scale, net capital, and service coverage. The combined entity—leveraging Dongxing and Cinda’s client networks and capital resources alongside CICC’s expertise in investment banking, cross-border services, and wealth management—marks a substantial step toward building a global investment bank comparable to Goldman Sachs or Morgan Stanley.

**Risks**: Market volatility, earnings forecast uncertainty, and technological disruptions.