CICC - Dongxing Securities - Cinda Securities Arbitrage Analysis

There were many investors participating in arbitrage involving China International Capital Corporation (CICC), Dongxing Securities, and Cinda Securities in the early forums. Recently, their stock prices have all dropped below the cash option/exercise request price. I have rarely participated in similar operations before, so I am tentatively analyzing the opportunities and risks; I welcome everyone’s criticism and suggestions.

1. Key Points:
Participating in this investment carries substantial overall risk, and the drop below the exercise price is reasonable.
Ranking by investment stability:
CICC H > CICC > Dongxing Securities > Cinda Securities
It is recommended to prioritize small positions in CICC H. Large positions do not offer good value.

2. Assessment Process
As of March 27, 2026, purely looking at the arbitrage space below the exercise price, it seems to be:
Cinda Securities (8.28%) > Dongxing Securities (4.46%) > CICC H (6.61%) > CICC (6.36%)
However, we need to consider the following dimensions comprehensively:
(1) Willingness to maintain high stock prices
The basic logic of this kind of arbitrage is that the dominant party needs to keep the stock price above the exercise price to avoid too many dissenting shareholders affecting the process. Therefore, the voting structure needs to be considered.
Cinda Securities: Cinda Asset holds 79%, exceeding 2/3 of the voting rights, so there is no need for minority shareholders to vote in favor, hence there is no incentive to maintain the stock price.
Dongxing Securities: Oriental Asset Management holds 45%, the top ten shareholders combined hold 61%, and the gap to 2/3 is about 5%. They may be able to communicate with some shareholders to vote in favor, giving them some incentive to maintain the stock price, but it is not strong.
CICC: The largest shareholder, Central Huijin, holds A-shares, accounting for 40% of the total equity and 66% of A-shares; the Hong Kong stock equity is more dispersed. Because Central Huijin avoids voting, the voting rights are extremely dispersed, so CICC has a strong incentive to maintain the stock price, avoiding a drop below the dissenting shareholders’ exercise price, which could lead to many minority shareholders voting against the merger.
Ranking of dominant willingness:
CICC H > CICC > Dongxing Securities > Cinda Securities
(2) Difficulty of maintaining high stock prices
Cinda Securities has a free-float market capitalization of 11.4 billion, Dongxing Securities has 22.3 billion, CICC A-shares have 32.3 billion, and CICC H-shares have 33.7 billion. Overall, the differences are not significant.
Considering market transaction activity, the difficulty ranking is as follows:
Cinda Securities < CICC H < CICC = Dongxing Securities.
(3) Risk of exercise price reduction
This merger proposal includes a price adjustment mechanism.
Since the CSRC Capital Market Service Index has dropped by 14% compared to before the suspension, it is only a step away from a 15% drop. The three A-share brokerage firms almost meet one of the conditions for a reduction; the second condition depends on whether individual stocks can maintain a decline of 15%, which is relatively difficult to predict.
CICC H shares have greater difficulty in adjustment, as the Hang Seng Index has only dropped by 3.4% compared to before the suspension, and the Hang Seng Composite Industry Index - Financial Sector has still risen compared to before the suspension, making it difficult to meet the adjustment criteria in the short term.
Ranking of reduction risk:
CICC H < CICC = Dongxing Securities = Cinda Securities

In summary, this merger is led by Central Huijin, and I do not doubt its realization, but due to the significant differences in the willingness of each company to maintain stock prices, along with the price adjustment mechanism, from the perspective of investment stability, CICC H = CICC > Dongxing Securities > Cinda Securities.