Mergers and acquisitions resume: valuation recovery window opens for the brokerage sector

The theme of securities firm mergers and acquisitions is heating up again. Recently, Dongwu Securities announced plans to acquire Donghai Securities’ control through share issuance, adding another regional securities firm consolidation case to the industry. Industry insiders say that under the continuous encouragement of regulatory policies for mergers, industry concentration is increasing, and the securities sector is experiencing a triple resonance of performance growth, low valuation, and M&A catalysts. The valuation repair window is opening.

A New Stage in Industry Mergers and Acquisitions

Dongwu Securities’ plan to acquire Donghai Securities’ control marks a new phase of regional deepening in securities firm mergers. Industry experts believe this aligns with the trend of strengthening and optimizing the industry, improving quality and efficiency, helping both parties achieve complementary advantages, and releasing business synergy effects. It provides stronger financial support for the development of the real economy and the construction of the sci-tech innovation ecosystem.

The new “Guidelines on Supporting the Development of Leading Financial Institutions” issued in April 2024 explicitly state, “Support leading institutions to enhance core competitiveness through mergers, reorganizations, and organizational innovation, and encourage small and medium-sized institutions to develop with differentiation and特色经营.” Since then, industry consolidation has accelerated significantly, with cases such as Guolian Securities acquiring Minsheng Securities, Guotai Junan absorbing Haitong Securities, Zheshang Securities acquiring Guodu Securities, and Western Securities acquiring Guorong Securities.

Dongwu Securities and Donghai Securities are both local securities firms in Jiangsu Province. This acquisition aligns with Jiangsu Province’s “14th Five-Year Plan” deployment, helping to strengthen local legal person securities firms, further optimize the layout in key fields, industries, and regions, promote efficient allocation and coordination of financial resources within the province, and deepen the integration of industry chains, capital chains, and innovation chains. It aims to continuously enhance the province’s comprehensive financial capacity, empower the construction of the Suzhou-Wuxi-Changzhou metropolitan area, and better serve the province’s high-quality development and the Yangtze River Delta integration.

Gao Chao, Chief Non-Banking Analyst at Kaiyuan Securities, said that this acquisition responds to regulatory policies promoting differentiated development and is expected to improve resource allocation efficiency in the region for both firms, achieving good synergy effects, such as focusing resources on niche areas,特色客户群, and重点区域.

Solid Foundation for Sector Valuation Repair

Industry insiders believe that the securities sector is at the intersection of accelerated industry consolidation and the bottom of the valuation cycle. The renewed enthusiasm for M&A themes, combined with performance and valuation recovery, forms the core investment logic for the current sector.

Wang Zejun, Non-Banking Analyst at China Post Securities, said that Dongwu Securities’ plan to acquire Donghai Securities’ control signals a major M&A catalyst for the industry. The strong alliance of regional securities firms is expected to increase market share for both firms and further boost the M&A theme.

“The wave of mergers and acquisitions drives the optimization of industry competition patterns, and currently, the sector’s valuation and institutional holdings remain low,” Gao Chao said. He is optimistic about the spring market for securities, recommending investors focus on performance catalysts in the sector, with retail and wealth management being the primary beneficiaries.

According to Luo Zhuanhui, Chief Non-Banking Analyst at Shenwan Hongyuan, considering the strong certainty of year-on-year growth in the first quarter of 2026 earnings and the sector’s current valuation at a historical low, once market styles balance out, the securities sector will be supported by performance growth, low valuation, and capital market policy catalysts, making for a solid foundation for sector recovery.

In terms of investment strategy, Gao Chao suggests investors focus on three main lines: first, securities firms with low valuation and high profit contribution from wealth management; second, leading securities firms with low valuation; third, securities firms with retail advantages.

(Source: China Securities Journal)