Dongxing Securities Co. Ltd. (DXSECU)

Dongxing Securities’ current credit quality is weaker than top-tier securities companies on a standalone basis, but given its position within a state-owned financial group, 2025 earnings recovery, and sufficient regulatory capital and liquidity, it has a reasonable degree of support for a mid-tier securities company. Current credit quality is supported by the relationship with China Orient / Central Huijin, capital, liquidity and market access, while the CICC merger should be viewed separately as an incomplete event that could provide additional credit enhancement if completed. Looking only at standalone earnings, credit direction is flat to somewhat variable depending on market conditions, but it could turn positive on an event-dependent basis if the CICC merger is approved and completed as planned. The probability of a rapid short-term deterioration in credit quality is not high, but the current view could deteriorate relatively quickly if failure of merger approval, capital-market stress, deterioration in repo and bond-market funding, and expansion of compliance issues occur together.

The credit profile is supported by ties with China Orient / Central Huijin, the earnings and capital improvement confirmed in 2025, parent-company net capital, LCR, NSFR and access to the domestic bond market. Dongxing’s standalone scale is smaller than CICC or CITIC Securities, but as a securities subsidiary within a state-owned financial group, it has higher support expectations and greater policy restructuring value than a normal privately owned small or mid-sized securities company. CICC integration could make this support expectation more concrete, but as of 2026-05-21, approvals and closing remained incomplete, so the stages need to be separated when incorporating it into the current credit view.

The largest constraint is volatility in revenue and liquidity as a market-based securities company. The 2025 performance improvement is positive, but much of wealth management, investment and trading, investment banking and Hong Kong business is linked to market conditions. The decline in 1Q2026 operating revenue shows that earnings improvement has not yet become sufficiently stable recurring income. The liability structure, which depends on short-term financing payable, repos, bond maturities and customer-related funds, is also a reason to continue monitoring funding even if LCR is high in normal times.