CICC - Dongxing Securities - Cinda Securities Arbitrage Analysis

There were a great many investors participating in arbitrage involving China International Capital Corporation, Dongxing Securities, and Cinda Securities on the early forum. Recently, their share prices have all fallen below the cash option/exercise price for the tender offer request right. I previously participated in similar operations only rarely, and I am now attempting to analyze the opportunities and risks. Please feel free to criticize and correct as appropriate.

I. Key points:
Overall risk for this investment is relatively high, and there is a reasonable basis for the price falling below the exercise price.
Ranked by how prudent the investment is from most to least:
China International Capital Corporation H = China International Capital Corporation > Dongxing Securities > Cinda Securities
It is recommended to participate first with a small position in China International Capital Corporation H. The cost-effectiveness of taking a large position is not high.

II. Evaluation process
As of March 27, 2026, looking purely at the arbitrage space created by the share price falling below the exercise price, it seems it should be:
Cinda Securities (8.28%) > Dongxing Securities (4.46%) > China International Capital Corporation H (6.61%) > China International Capital Corporation (6.36%)
But we need to take the following dimensions into account:
(1) Willingness to keep the share price high
The basic logic of this kind of arbitrage is that the lead party needs to keep the share price above the exercise price, to avoid having too many dissenting shareholders, which would affect the progress of the process. Therefore, we need to consider its voting structure.
Cinda Securities: Cinda Assets holds 79% of the shares, already exceeding 2/3 of the voting rights; there is no need for small shareholders to vote in favor, so there is absolutely no incentive to maintain the share price.
Dongxing Securities: Orient Asset Management holds 45%, and the top ten in total account for 61%; the gap to 2/3 is about 5%, so it may be possible to communicate with some shareholders to obtain their votes in favor, giving it some incentive to maintain the share price, though not a strong one.
China International Capital Corporation: The largest shareholder of China International Capital Corporation, Central Huijin, holds A-shares representing 40% of all outstanding share capital and 66% of A-shares; the equity in the H-shares is even more dispersed. Because Central Huijin avoids voting, voting rights are extremely dispersed, so China International Capital Corporation has a stronger incentive to maintain the share price—preventing it from falling below the exercise price of the dissenting shareholders’ tender offer request right—so as to avoid large numbers of small shareholders voting against, which could cause the merger to fail.
Ranking of the lead party’s willingness:
China International Capital Corporation H > China International Capital Corporation > Dongxing Securities > Cinda Securities
(2) Difficulty of maintaining a high share price
Cinda Securities has a free-float market value of 11.4 billion; Dongxing Securities has a free-float market value of 22.3 billion; China International Capital Corporation (A-shares) has a free-float market value of 32.3 billion; and China International Capital Corporation (H-shares) has a free-float market value of 33.7 billion. Overall, the difference is not large.
Taking into account market trading activity, the difficulty ranking is as follows:
Cinda Securities < China International Capital Corporation H < China International Capital Corporation = Dongxing Securities.
(3) Risk of lowering the exercise price
This merger plan includes a pricing adjustment mechanism.
Because the China Securities Regulatory Commission’s capital market services index has already fallen 14% compared with before the trading suspension, it can be said that it is only one step away from a further 15% drop. Among the three A-share brokerages, almost all meet one of the conditions for the price adjustment; the second depends on whether the particular stock can hold the 15% downside threshold, and individual-stock fluctuations are relatively hard to predict.
Lowering the difficulty for China International Capital Corporation’s H-shares is much higher: the Hang Seng Index has fallen only 3.4% compared with before the trading suspension; the Hang Seng composite industry index—financials sector—has still risen compared with before the suspension, so it will be difficult to meet the adjustment condition in the short term.
Ranking of the risk of a downward adjustment:
China International Capital Corporation H < China International Capital Corporation = Dongxing Securities = Cinda Securities

In summary, this merger is led by Central Huijin. I do not doubt that it will get implemented, but because the differences in willingness to maintain the share price among the companies are significant, and because it includes a pricing adjustment mechanism, from the perspective of investment prudence, China International Capital Corporation H = China International Capital Corporation > Dongxing Securities > Cinda Securities.