Source: Zhithon Finance

On February 14, the three major AMCs, CHINA CINDA, Dongfang Asset and Great Wall Asset, successively announced that the controlling shareholder, the Ministry of Finance, plans to transfer its shares to Central Huijin through non-compensatory transfer. Due to this change in shareholding, the listed brokerages held by CHINA CINDA and Dongfang Asset, respectively, CIDIC SEC and Dongxing Securities, also announced that the actual controller of the companies will therefore change to Central Huijin. Similarly, although Great Wall Asset's controlled Changcheng Guorui Securities has not yet announced it, its actual controller will also change to Central Huijin. CITIC SEC pointed out that the shareholding adjustment of the Huijin series of brokerages is expected to promote a new round of mergers and acquisitions in the securities industry, focusing on the differentiated path of administrative mergers and market mergers under the same actual controller in the securities industry. Key focuses: 1) Securities institutions under the same actual controller 2) Securities companies with a high likelihood of subsequent market-driven mergers.

Specifically, Great Wall Asset announced that it received a notice on February 14. According to the relevant deployments of the reform of party and state institutions, the company's controlling shareholder, the Ministry of Finance, plans to transfer all of the 37.67 billion shares of the company it holds (approximately 73.53% of the company's total issued shares) to Central Huijin through non-compensatory transfer. In addition, CHINA CINDA and Dongfang Asset also released similar announcements stating that some shares held by the controlling shareholder, the Ministry of Finance, will be transferred to Central Huijin.

With the change of shareholding among the three major AMCs, the controlled brokerages under them are also affected, and the actual controller of the companies changes from the Ministry of Finance to Huijin.

This share transfer is a further implementation of the "Party and State Institutional Reform Plan" issued in March 2023. Article 12 of the "Party and State Institutional Reform Plan" requires the improvement of the management system for state-owned financial capital. According to the relevant management regulations on state-owned financial capital contributors, market operation institutions managed by central financial management departments will be separated, and relevant state-owned financial assets will be transferred to state-owned financial capital entrusted management institutions, which will unifiedly perform the duties of contributors based on the authorization of the State Council. Central Huijin, as a state-owned sole proprietorship established by the state, lawfully exercises the rights and obligations of contributors to key financial enterprises on behalf of the state and is the best recipient of the Ministry of Finance's equity transfer.

After this transfer is completed, Central Huijin, as the entrusted management institution for state-owned financial capital, will hold 58.00% / 71.55% / 73.53% of the shares of CHINA CINDA, Dongfang Asset, and Great Wall Asset respectively, while the Ministry of Finance will withdraw from management functions and focus on fulfilling its regulatory functions. Subsequently, Central Huijin will directly control three national AMCs, while also indirectly controlling China Galaxy Asset Management through its holding of China Galaxy Financial Holdings (69.07% ownership), achieving unified control over all national AMC licenses except for CITIC Financial Assets (formerly known as "Huarong Assets"). Through the centralized market-oriented management of AMCs by Central Huijin, the efficiency of allocation of state-owned financial capital and the ability to prevent risks will be further enhanced.

In addition, the Ministry of Finance will transfer 66.7% of its equity in the China Securities Finance Corporation to Central Huijin. The China Securities Finance Corporation is a securities financial institution set up by the CSRC to engage in Finance and Securities Lending business and provide related services. It is also an important part of the national team's organization. After this shareholding adjustment, the national team is expected to achieve better coordinated management at the organizational level while maintaining unified actions. As of the end of the third quarter of 2024, China Securities Finance, Central Huijin, and China Securities Finance Asset Management held stock market caps of 0.61 trillion, 3 trillion, and 0.08 trillion respectively.

It is worth noting that through the equity acquisition of three AMC companies and the Finance and Securities Lending company, the number of influential securities firms under Central Huijin has increased to 8, which are China Galaxy (indirectly holding 48.20% via China Galaxy Financial Holdings and Finance and Securities Lending), China International Capital Corporation (directly holding 40.11%, the largest shareholder), SWHY (indirectly and directly holding a total of 48.93% through Jianyin Investment and Finance and Securities Lending), CHINA CINDA (indirectly holding 78.67%), Dongxing (indirectly holding 45.00% via Dongfang Assets), Great Wall Guorui Securities (indirectly holding 67.00% via Great Wall Assets), China Securities Co.,Ltd. (directly holding 30.76%, the second largest shareholder), and Everbright (influencing 48.70% of shares through controlled Everbright Group, Finance and Securities Lending, and invested Everbright Holdings).

In the context of the country continuously encouraging industry resource allocation through mergers and acquisitions, and accelerating the construction of international first-class investment banks, the multi-license efficiency integration plan of Huijin's brokerage is worth observing.

West Securities believes that after the equity transfer, Huijin now holds equity in 7 brokerages, namely China International Capital Corporation, China Galaxy, SWHY, China Securities Co.,Ltd., CHINA CINDA, Dongxing, and Great Wall Guorui Securities. In light of regulatory promotion of supply-side reform in the securities industry and support for leading brokerages to grow stronger, there is a possibility for further consolidation of the equity held by Huijin's brokerages; integration with similar shareholder backgrounds or registered locations may be easier to advance, suggesting continued attention to the main line of brokerage mergers and acquisitions.

Related Concept Stocks:

$CHINA CINDA (01359.HK)$ The company was established in April 1999 and is one of the first four financial asset management companies approved by the State Council. As of the end of 2023, it mainly includes non-performing asset management business, which accounts for 58.3% of revenue, 52.7% of pre-tax profit, and 57.3% of assets; financial services include banking, securities business, and public offering management business.

$CICC (03908.HK)$ The new stage of supply-side reform in the industry may accelerate. The company's internationalization and specialization capabilities are prominent, which is expected to continuously consolidate various business advantages and create an international first-class investment bank. The State Council stated that it will concentrate efforts to build a 'national team' in the financial industry, promoting large state-owned financial enterprises to become stronger and better, and a faster pace of supply-side reform is expected. The company has solid advantages in international business and investment banking, which is expected to continuously strengthen service capability advantages. Wealth management business continues to enhance asset allocation and investment advisory service capabilities, with investment banking innovating fixed income products, continuously improving merger and acquisition service capabilities, and is expected to achieve above-expectation development.

$CGS (06881.HK)$ Recently, China Galaxy Securities disclosed its 2024 performance report, which exceeded expectations. In 2024, the company achieved revenue of 35.4 billion, a year-on-year increase of 5%; net income attributable to shareholders of 10.1 billion, a year-on-year increase of 29%; and ROE of 8.4%, a year-on-year increase of 0.89 percentage points. In Q4 2024, the quarterly net income attributable to shareholders was 3.17 billion yuan, a year-on-year increase of 148.5% and a quarter-on-quarter increase of 23.1%; the quarterly operating income in Q4 2024 was 8.28 billion yuan, a year-on-year increase of 1.5%. From a quarterly perspective, the operating profit in Q4 2024 was the highest of the year, while the operating expenses were the lowest of the year.

编辑/jayden