Small and medium-sized brokerage firms frequently sell equity, revealing three main characteristics

China Securities Journal, February 22 — (Reporter Wang Chen) In recent years, under the policy guidance of “building a first-class investment bank” and promoting mergers and acquisitions restructuring, China’s securities industry has entered a period of deep reshuffling. Between 2025 and 2026, the flow of equity in small and medium-sized brokerages will accelerate, becoming a key feature in the industry’s structural reorganization.

From strategic mergers of large firms acquiring smaller ones and strong alliances, to local state-owned assets taking controlling stakes in regional brokerages, to shareholders proactively reducing holdings for asset optimization and judicial auctions of equity due to debt issues, multiple equity changes are unfolding simultaneously.

Overall, the wave of equity flow in the securities industry during 2025-2026 is an inevitable result of regulatory efforts to promote high-quality development and to build first-class investment banks. It also reflects the industry’s internal need to respond to competition and optimize resource allocation.

Under the trend of state-owned asset-led consolidation, industry concentration will continue to rise. After license dividends diminish, competition among brokerages will shift back to core capabilities and specialized services. Firms lacking distinctive business lines and core advantages may face elimination, while brokerages with regional strengths or high-quality specialized licenses will become hotly contested assets.

Meanwhile, industry integration is also entering a “pain period,” with several merged brokerages undergoing system migrations, personnel reorganization, and organizational restructuring. The Matthew effect in the securities industry is further magnified, and a new competitive landscape is accelerating formation.

Accelerated Strategic Mergers and Expanding Brokerage Footprints

Strategic mergers of large firms acquiring smaller ones and forming strong alliances have become one of the main themes of this round of equity flow among small and medium-sized brokerages. Leading brokerages and regional advantage firms are rapidly expanding their business footprints through equity acquisitions, reinforcing the scale effect in the industry.

Securities firms such as Guolian Securities, Zheshang Securities, Western Securities, and Guoxin Securities have taken the lead by acquiring stakes through share issuance, cash purchases, judicial auctions, and other methods. These acquisitions cover multiple business areas including investment banking, brokerage, and asset management, accelerating industry consolidation.

Guolian Securities, for example, increased its scale by acquiring 99.26% of Minsheng Securities through share issuance, achieving resource complementarity in investment banking and other fields. Zheshang Securities gained a 34.76% stake in Guodu Securities via “agreement transfer + judicial auction,” further strengthening its presence in northern markets. Western Securities spent approximately 3.825 billion yuan to acquire 64.60% of Guorong Securities, a move aimed at expanding nationwide operations and enhancing competitiveness. Guoxin Securities issued shares to acquire 96.08% of Wanhua Securities, leveraging Wanhua’s regional resources and business features to solidify its position in South China. These mergers exemplify how capital is accelerating industry integration, further highlighting the Matthew effect in the securities sector.

State-Owned Capital Takes the Lead, Local SOEs Strengthen Control

Beyond strategic mergers, local state-owned assets (SOEs) taking controlling stakes or reasserting control over brokerages is another prominent feature of this equity flow cycle. In response to industry transformation and risk mitigation needs, local SASACs are actively involved through equity transfers, capital increases, and other means to strengthen control over regional brokerages. This state-led financial resource integration has become a key direction in regional financial planning, significantly improving the stability and resilience of small and medium-sized brokerages.

Dongan Securities’ equity reversion exemplifies local SOE resource integration. By 2025, Jinlong Co., Ltd. had nearly completed transferring its holdings in Dongan Securities to Dongguan Financial Holdings, a local SOE, marking Dongan’s return to pure state-controlled ownership. The company is now accelerating its IPO process, aiming for further growth via capital markets.

Hubei State-owned Assets has also deepened integration with Changjiang Securities, with Changjiang Industrial Group acquiring 863 million shares held by Hubei Energy and Three Gorges Capital, representing a 15.6% stake. This move further consolidates Hubei SOE control over Changjiang Securities and lays a foundation for leveraging local SOA resources to develop markets in Hubei and central China.

Industry insiders note that local SOE involvement in small and medium brokerages is both a measure to fulfill regional financial supervision responsibilities and a strategic move to resolve industry risks. It also facilitates regional economic development through financial resource integration.

Diverse Equity Flows: Active Exits and Passive Disposals Coexist

As equity flows accelerate among small and medium brokerages, both proactive exits by shareholders and passive disposals are evident. Some shareholders are reducing holdings or liquidating assets for non-core business reasons, seeking asset optimization. Conversely, cases of judicial auctions and listings due to shareholder debt defaults are increasing, with market appetite for acquisitions polarized.

Strategic exits and reductions by shareholders have become routine. In 2025, ten listed brokerages disclosed initial plans for shareholder reductions, including firms like Eastmoney, Caida Securities, Bank of China Securities, and Founder Securities. These sellers include private capital and state-owned entities.

For example, Jinlong Co. plans to fully liquidate its 67.78% stake in Zhongshan Securities after transferring Dongan Securities, and is seeking buyers on the Shanghai United Assets and Equity Exchange, with an estimated transaction value exceeding 4 billion yuan. Guosheng Securities’ sixth-largest shareholder, Jiangxi Construction Materials, reduced its holdings by 2.8 million shares (0.14%), aiming to optimize its asset structure. Beijing State-owned Capital Operation and Beijing Xicheng Capital jointly transferred their 49% stake in Daiwa Securities, seeking to optimize their financial asset portfolio.

Passive equity disposals due to debt issues are also increasing. Several brokerages, including Hongta Securities, Datong Securities, Zhongtai Securities, and Caitong Securities, have experienced judicial auctions or listings of their shares. For instance, Hongta Securities’ shares were auctioned due to pledged collateral disputes involving its shareholder Kunming Industrial Investment; Datong Securities’ second-largest shareholder listed 15.42% of its shares for sale, and Shenyang Wanjia Industrial’s 9.1606% stake was forcibly auctioned. Naxin Securities and Yuekai Securities also announced share listings, with passive disposals rising.

Despite frequent judicial auctions and listings, market response remains mixed. Bohai Securities’ shares have been repeatedly auctioned in 2025 without success. Jinlong Co., as a major shareholder of Dongan and Zhongshan Securities, also experienced widespread failed auctions. Hualong Securities’ share disposals in 2025 also mostly ended in failed sales, with two auctions of Hongta Securities being suspended.

However, in some cases, strong buyers have emerged. Caitong Securities’ judicial auction of 37.4066 million shares was successfully purchased by China Great Wall Asset Management, a large state-owned financial asset manager, due to debt disputes.

Emerging Trends: Industry Enters a Deepening Integration Phase

Behind the intense equity flows among small and medium brokerages, clearer industry development trends are emerging. The decline of license dividends, state-led consolidation, and the pain of industry integration are key themes shaping the current stage. The securities industry is entering a phase of deep integration characterized by three main features:

First, the fading of license dividends marks a crucial turning point. Previously, securities licenses were highly valued, with high premiums attached to brokerages’ licenses. Now, as competition intensifies, small and medium firms lacking distinctive business lines and core strengths face difficulties even when selling equity at discounts, with many deals falling through. The valuation logic has fundamentally shifted: buyers now prioritize regional advantages and specialized licenses, with firms holding high-quality public fund or asset management licenses commanding significant premiums. Conversely, traditional brokerage licenses are often traded below net asset value, leading to significant valuation divergence.

Second, state-owned capital-led consolidation is a defining feature of this cycle. Most equity flows are ultimately directed toward “returning to SOE control.” Whether through local SASACs consolidating regional financial resources or central financial institutions expanding via horizontal mergers, SOEs play a dominant role in industry restructuring. Under SOE leadership, industry concentration is expected to rise sharply by 2026, further consolidating the top-tier firms and increasing state ownership.

Third, industry consolidation involves a phase of “pain,” with 2026 becoming a critical year for post-merger integration. Cases like CITIC Securities’ merger with Haitong Securities and the operational integration of CICC’s East and Xinda Securities exemplify large-scale organizational restructuring. System migrations, personnel reassignments, and business integrations are common challenges. Industry insiders believe that this pain period is a necessary stage for high-quality development. As consolidation progresses, operational efficiency and core competitiveness will be further enhanced.