Dongxing Securities Issuer Summary

Report date: 2026-05-21
Coverage ticker: DXSECU
Legal issuer focus: Dongxing Securities Co., Ltd. / 东兴证券股份有限公司
Primary source cut-off: 2026-05-21

1. Business Snapshot and Recent Developments

Dongxing Securities is a listed full-service securities company with its origins in China’s state-owned financial asset management company system. It should not be viewed as a simple private-sector broker, nor as a commercial bank with a deposit base. Rather, with China Orient Asset Management as its controlling shareholder, and with Central Huijin becoming China Orient’s major shareholder from June 2025, Dongxing should be analysed as a market-based financial issuer that has moved more firmly into the context of state-owned financial capital restructuring. Its main businesses are wealth management, including brokerage and margin financing and securities lending, disclosed as “财富管理”; proprietary investment and trading, disclosed as “投资交易”; investment banking; asset management; and other businesses including futures and Hong Kong operations. For bond investors, the core credit question is how far earnings linked to securities-market activity and the volatility of repo and short-term funding are offset by the company’s position within a state-owned financial group, regulatory capital, liquidity, and the planned absorption merger by CICC.

2025 was a year in which the company’s revenue, earnings and equity capital clearly improved. According to the 2025 annual report summary, consolidated operating revenue was RMB4.71bn, up 10.25% YoY, while net profit attributable to shareholders of the parent was RMB2.10bn, up 36.10% YoY. The 2024 comparative figures were adjusted due to a change in the accounting treatment of standard warrant trading, and the previously disclosed 2024 operating revenue of RMB9.37bn should not be confused with the adjusted figure of RMB4.27bn. From a credit perspective, the 2025 earnings recovery is positive, but it should be discounted for the high dependence of revenue sources on market trading volumes, proprietary positions, and bond and equity market conditions.

1Q2026 also showed that the improvement trend is not linear. In the 1Q2026 report, operating revenue was RMB0.91bn, down 11.55% YoY on an adjusted basis, and net profit attributable to shareholders of the parent was RMB0.35bn, down 7.02% YoY. At the same time, total assets expanded to RMB120.36bn at end-March 2026, and equity attributable to shareholders of the parent also increased to RMB33.79bn. As this was an unaudited quarterly period, the credit view should not be fixed on the basis of a single quarter. However, it confirms that earnings can move quickly if investment and trading revenue weakens, and that risk capital and liquidity require close monitoring when the balance sheet is expanding.

The largest event from 2025 to May 2026 is the planned share-exchange absorption merger of Dongxing Securities and Cinda Securities by CICC. CICC’s HKEX announcement dated 2025-12-17 set out terms under which 0.4373 CICC A shares would be issued for each Dongxing A share. Subsequently, on 2026-05-18, the draft merger plan was approved by the board, and a summary of the draft plan was published on 2026-05-19. At the draft stage, Dongxing’s share-exchange price was updated to RMB16.05, CICC A shares’ share-exchange price to RMB36.68, and the exchange ratio to 0.4376 CICC A shares for each Dongxing A share. However, as of 2026-05-21, approvals by the shareholders’ meetings of China Orient, China Cinda, CICC, Dongxing and Cinda Securities, review by the Shanghai Stock Exchange, CSRC approval and registration, and other procedures remained outstanding. The merger should not be treated as completed.

The merger plan has two-sided credit implications. If completed, Dongxing’s assets, liabilities, businesses, personnel, contracts, qualifications and other items are expected to be assumed by CICC as the surviving company, and integration into a larger state-owned securities platform could be positive from the perspectives of support expectations and market access. At the same time, while the merger remains incomplete, uncertainties remain over approvals, creditor notification, repayment or provision of security where required, shareholders’ cash exit rights, delisting and cancellation of the legal entity, and integration of businesses, personnel, systems and risk management. Accordingly, this report treats the CICC merger not as “post-completion credit enhancement”, but as an event-dependent factor whose approvals, closing and integration still need to be confirmed.

Another recent development is on the compliance side. The 1Q2026 report disclosed that, on 2026-04-03, the CSRC Beijing Regulatory Bureau issued a warning letter to Dongxing Securities. The matter related to issues in the issuance process for projects including “24 Shimen 01”, “Hangtou 01 Senior” and “Hangtou 01 Subordinated”, and the company stated that it would strengthen bond-business management and proceed with rectification. This case alone does not materially change the capital or liquidity assessment, but it is a monitoring item rather than merely a news item, as it could affect internal controls in investment banking and bond businesses, merger review, and post-integration risk-control assessment.

2. Industry Position and Franchise Strength

Dongxing Securities is some distance from the leading large securities firms in China’s securities industry, such as CICC, CITIC Securities, Huatai and Guotai Haitong, but it is not a small, single-region broker. Total assets of RMB114.20bn, equity attributable to shareholders of the parent of RMB33.24bn, parent-company net capital of RMB28.66bn, and 2025 operating revenue of RMB4.71bn are sufficient to treat it as at least a mid-tier market participant among listed securities companies. However, this report has not recalculated the latest comprehensive ranking table for China’s securities industry, so it is more conservative to position Dongxing as a “mid-tier full-service securities company within a state-owned financial group”, rather than definitively describing it as a “large” securities firm.

The core of the franchise is the combination of wealth management and margin financing, investment and trading, investment banking, asset management, and cross-border capabilities including Hong Kong. In 2025 operating revenue, wealth management accounted for 41.60% and investment and trading for 36.82%, with these two businesses together accounting for just under 80% of group revenue. This indicates a structure in which both a stable customer base and proprietary and investment revenue sensitive to market conditions affect credit quality. Investment banking and asset management can provide revenue diversification from a credit perspective, but at present they are not large enough by themselves to absorb volatility in group-wide revenue.

In wealth management, cumulative stock and fund brokerage transaction value was RMB4,047.77bn in 2025, up 50.04% YoY, with a market share of 0.41%. Net income from securities brokerage was RMB0.853bn, up 31.37% YoY. This is not an overwhelming market share of the kind seen at leading securities firms, but it does confirm a brokerage base capable of capturing revenue during active trading markets. From a credit perspective, this should be assessed as a fee base linked to customer trading volume and market sentiment, not as a stable deposit base.

In investment banking, Dongxing was the lead underwriter for four IPOs in 2025, ranking joint ninth by number of transactions according to Tonghuashun statistics, and tenth by lead underwriting amount with RMB2.545bn. This is a strong characteristic for a mid-tier securities company, and it also explains why the CICC merger plan emphasises “synergies in investment banking, research, investment, wealth management and cross-border finance”. At the same time, although investment banking revenue increased sharply in 2025, it accounted for only 6.99% of total operating revenue. It is exposed to individual transactions, issuance markets, the regulatory and review environment, and compliance, and is difficult to regard as a stable pillar of credit quality.

In bond underwriting, the combined underwriting amount for corporate bonds, financial bonds, enterprise bonds, ABS and other products was RMB46.18bn in 2025, with 193 underwriting transactions and a Wind ranking of 38th. In non-financial enterprise debt financing instruments in the interbank market, the company disclosed 72 transactions, underwriting volume of RMB20.28bn, and underwriting revenue of RMB116.02mn. Bond business contributes to revenue diversification, but as the April 2026 warning letter shows, the quality of underwriting, due diligence, information disclosure and internal controls can also become a credit-relevant reputational risk.

In terms of regional base, the HKEX announcement describes Dongxing as having more than 90 securities branches nationwide and long-standing customer accumulation and channel advantages in Fujian Province. This differs from a top securities firm with a massive national network, but it leaves room to combine a regionally embedded customer base with the special-situation, distressed-asset and state-owned financial restructuring context of the China Orient group. From a credit perspective, the franchise is deeper than that of a fully generic brokerage company, but it is not diversified enough to absorb a broad capital-market downturn on its own.

Dongxing Hong Kong is also important. The 2025 annual report summary states that the subsidiary received a HKD300mn capital increase in 2025 and obtained an investment-grade BBB- rating from Fitch. This is positive for overseas business and autonomous external funding capacity, but it does not mean that all debt at Dongxing Securities itself has the same direct rating or guarantee. Rather, it increases the need to verify cross-border business, offshore bonds, subsidiary support and the scope of guarantees by legal entity.

3. Segment Assessment

By segment, Dongxing’s credit profile is close to a structure in which it has customer touchpoints through wealth management, earns profits through investment and trading, and builds business characteristics through investment banking and asset management. Looking purely at stability, wealth management and asset management are preferable, but the 2025 earnings recovery was supported substantially by active markets and proprietary and investment trading. Therefore, it is more important to distinguish which revenues are sensitive to cycles, market prices and capital consumption than simply to note that revenue increased.

Wealth management is currently the largest revenue pillar. In 2025, amid more active A-share market trading, stock and fund brokerage transaction value, net income from securities brokerage, and investment advisory business revenue all increased. The principal balance of margin financing and securities lending was RMB20.57bn at end-2025, and interest income from margin financing and securities lending was RMB896.7mn, making margin financing another major revenue source. However, in a market downturn, margin business can turn into risk through collateral value, margin calls, customer concentration and liquidity demand. The overall maintenance margin ratio for margin financing and securities lending was 268.82% at end-2025, providing current headroom, but this does not fully eliminate losses if market conditions deteriorate.

Investment and trading is the segment that requires the most cautious credit assessment. Although investment and trading revenue declined slightly YoY in 2025, it accounted for about 37% of group revenue and has a significant effect on earnings. The company responds to bond-market volatility through fixed-income investment, emphasises an absolute-return philosophy in equity investment, and is expanding product structures and the customer base in OTC derivatives. These activities broaden revenue opportunities, but they depend on interest rates, credit spreads, equity prices, volatility, hedging, collateral and repo funding. Treating investment and trading revenue as “stable earnings” can easily overstate credit strength.

Investment banking recovered notably in 2025, but two credit interpretations are needed. First, the IPO lead underwriting count and bond underwriting performance show that Dongxing is not merely a small-ticket brokerage company and has a meaningful investment-banking function. Second, investment-banking revenue depends on the regulatory environment, deal approvals, issuance markets, sponsor responsibilities and compliance, so it is difficult to place it at the centre of stable earnings. The April 2026 Beijing Regulatory Bureau warning letter indicates that the quality of bond business can affect future deal origination, internal-control assessments and post-merger integration costs.

Asset management is a desirable revenue source for securities-company credit. Private asset management, public-fund management and private investment-fund management can potentially reduce earnings cyclicality through AUM-based fees and customer relationships. The annual report summary states that the scale, number and customer base of single-account and collective asset-management products increased, and that Dongxing Fund’s equity-product scale rose materially. However, 2025 asset-management revenue fell 8.90% YoY and accounted for only 6.07% of total operating revenue. From a credit perspective, it should be viewed as a potential future stabiliser, but not yet as a pillar that can absorb volatility in investment and trading.

Other businesses include Dongxing Futures and Dongxing Hong Kong. Dongxing Futures disclosed customer equity of RMB3.31bn and total asset-management scale of RMB2.63bn at end-2025, and is involved in policy-oriented businesses such as “insurance + futures”. Dongxing Hong Kong’s performance improved on the recovery in the Hong Kong market, and it obtained a Fitch BBB- rating. These are positive for business diversification, but futures, Hong Kong and offshore businesses differ from the domestic parent in regulation, liquidity, legal entity and creditor protection, so they need to be separated carefully from a structural perspective.

4. Financial Profile and Analysis

Dongxing’s financial profile clearly improved in 2025, but the quality of that improvement needs to be discounted as a securities company. Operating revenue, pre-tax profit, net profit attributable to shareholders of the parent and ROE all improved from the adjusted 2024 level. Parent-company net capital and regulatory liquidity indicators are also strong and do not point to immediate capital or liquidity shortage. At the same time, operating cash flow at a securities company is heavily affected by customer funds, financial assets, repos, margin financing and proprietary positions, so repayment capacity should not be assessed solely from operating cash flow as it might be for a general corporate.

The 2025 earnings improvement is credit positive. Net profit attributable to shareholders of the parent increased from RMB0.82bn in 2023 to RMB1.54bn in 2024 and RMB2.10bn in 2025, while ROE improved from 3.09% to 5.57% and 7.13%. Retained earnings increased equity and net capital, and were reflected in regulatory indicators. Parent-company net capital was RMB28.66bn at end-2025, about 20% higher than RMB23.89bn at end-2024. For securities-company credit, it is important whether improved profitability is being translated into capital buffers, and this is supportive.

At the same time, the quality of revenue needs to be viewed conservatively. The 2025 revenue improvement was supported by more active A-share market trading, recovery in IPO and refinancing markets, bond underwriting, investment and trading, and the recovery in the Hong Kong market. These can be credited as operating performance, but they can also work in reverse if markets turn. The YoY decline in operating revenue and earnings in 1Q2026 indicates that the 2025 improvement should not be treated as stable recurring earnings.

On the balance sheet, total assets were RMB120.36bn, total liabilities RMB86.52bn and owners’ equity RMB33.84bn at end-March 2026. On the asset side, the large items were cash and bank balances of RMB21.85bn, clearing settlement funds of RMB5.16bn, margin financing loans of RMB19.98bn, financial assets held for trading of RMB31.44bn, other debt investments of RMB26.15bn, and other equity investments of RMB9.74bn. This is standard for a securities company, but from a credit perspective it means that market prices, collateral values, liquidity, haircuts and repo funding conditions can move simultaneously.

On the liability side, the notable items at end-March 2026 were short-term bonds and short-term financial liabilities, or short-term financing payable, of RMB12.14bn; call and interbank funding, or placements from other financial institutions, of RMB3.60bn; financial assets sold under repurchase agreements, or repo liabilities, of RMB23.38bn; customer brokerage balances and related payables, or agency brokerage securities funds, of RMB24.36bn; and bonds payable of RMB14.81bn. Customer-related liabilities differ from stable commercial-bank deposits and are affected by customer activity and market sentiment. Repo liabilities are sensitive to collateral liquidity and haircuts, and together with short-term financing payable create rollover dependence. Current LCR and NSFR levels show liquidity headroom, but the real monitoring point is how much of this can be maintained under market stress.

The decline in the risk coverage ratio in 1Q2026 is also notable. Net capital increased to RMB29.67bn, but the sum of risk capital reserves rose from RMB8.92bn at end-2025 to RMB10.30bn at end-March 2026, and the risk coverage ratio fell from 321.16% to 288.14%. The level itself remains high, but if balance-sheet expansion and risk-capital consumption continue, the relationship between improved profitability and regulatory capital headroom could change.

In summary, Dongxing’s financial profile had improved as of 2025, and regulatory capital and liquidity headroom remained as of end-March 2026. The constraints are market sensitivity of revenue, risks in investment and trading and margin financing, dependence on repo, short-term financing and bond refinancing, and uncertainty over the future structure while the merger remains incomplete. Financials therefore support the current credit profile, but are better viewed as a variable buffer supported by support expectations and market conditions, rather than as an independently strong breakwater.

5. Structural Considerations for Bondholders

For bondholders, the most important point is not to confuse Dongxing Securities itself, controlling shareholder China Orient, Central Huijin as the effective support channel, Hong Kong subsidiary Dongxing Securities Hong Kong Financial Holdings, offshore issuer Dongxing Voyage, and the surviving company CICC after the merger. The company’s position within a state-owned financial group increases support expectations, but it is not an explicit guarantee. When reading ratings or merger-assumption language, it is also necessary to verify which legal entity and which obligations are covered.

The support channel from China Orient and Central Huijin is important for Dongxing’s credit quality. According to the 2025 annual report summary, in June 2025 the Ministry of Finance transferred its China Orient stake to Central Huijin, the NFRA approved the shareholding change, and the CSRC approved Huijin as Dongxing’s actual controller. This changed Dongxing’s positioning from a securities subsidiary of an AMC under the Ministry of Finance to a securities subsidiary of a state-owned financial group under Huijin. The support expectation can be read more positively, but bondholders need to distinguish between “support expectation” and “legal guarantee”.

The CICC merger has different implications for bondholders depending on the stage. While incomplete, Dongxing remains an independent listed company, and the credit quality of existing debt depends on Dongxing itself, China Orient / Huijin support expectations, and the terms of each bond. After approval but before closing, creditor notification and repayment or provision of security where necessary become the focus. After closing, the draft plan provides that the surviving company is expected to assume Dongxing’s assets, liabilities, businesses, personnel, contracts and qualifications, and it will be necessary to verify the legal treatment of individual debts, delisting, cancellation of the legal entity, and the interpretation of guarantees, covenants and cross-default clauses.

The summary of the draft merger plan identifies as a risk that creditors may request early repayment or provision of security within the statutory period. This could create a temporary liquidity burden. However, the credit view does not need to assume that all creditors will request repayment. What matters is confirmation of procedural completion, creditor handling, notifications to individual bondholders, and post-assumption financial metrics of the surviving company. As of 2026-05-21, these remain unconfirmed items.

For domestic bonds, the 2025 annual report summary lists 21 Dongxing G2 (RMB0.82bn) and 23 Dongxing G1 (RMB1.40bn), both maturing in July 2026, multiple corporate bonds maturing in 2027-2028, and perpetual subordinated bonds issued in 2025. Perpetual subordinated bonds have capital characteristics, but their ranking, coupon payment, early redemption and loss-absorption features may differ from those of ordinary corporate bonds. The summary alone does not confirm the terms, so the prospectus should be checked for investment decisions on individual bonds.

For offshore bonds, Dongxing Voyage Co. Ltd. 5.30% guaranteed bond due 2027 appears in the rating section of the annual report summary. Fitch’s BBB- issue rating provides investment-grade floor support, but this report has not confirmed the guarantor, scope of guarantee, governing law, legal relationship between Dongxing itself and Dongxing Hong Kong, or whether there is a keepwell or guarantee agreement. Therefore, the offshore bond should not be treated as having the same protection level as domestic bonds at the parent.

6. Capital Structure, Liquidity and Funding

Dongxing’s liquidity is strong by ordinary-course regulatory indicators. Parent-company LCR was 312.06% and NSFR was 192.11% at end-2025; at end-March 2026, LCR remained 253.97% and NSFR 198.55%. Both are well above regulatory minimum levels, confirming formal headroom in short-term liquidity and stable funding. However, securities-company liquidity can deteriorate non-linearly under market stress. This is because declines in financial-asset prices, higher collateral haircuts, worsening repo rollover conditions, customer fund outflows and lower margin collateral values can occur simultaneously.

On the consolidated balance sheet at end-March 2026, cash and bank balances were RMB21.85bn, clearing settlement funds were RMB5.16bn, and period-end cash and cash equivalents were RMB26.77bn. This appears to be ample liquidity at first glance, but it includes customer funds deposited of RMB20.25bn and customer settlement reserves of RMB3.29bn. Customer-related funds are an important liquidity source for securities-company operations, but they need to be distinguished from proprietary funds that can be freely used for debt repayment.

In the liability structure, short-term market funding and repos are large. At end-March 2026, short-term bonds and short-term financial liabilities were RMB12.14bn, call and interbank funding was RMB3.60bn, repo liabilities were RMB23.38bn, and bonds payable were RMB14.81bn. In addition, customer-related payables were RMB24.36bn. For bond investors, the key issue is not the absolute amount of total liabilities, but which liabilities depend on short-term rollover, which are sensitive to collateral and market prices, and which are tied to customer accounts.

In terms of outstanding bonds, 21 Dongxing G2 and 23 Dongxing G1, with a combined RMB2.22bn, mature in July 2026. Multiple corporate bonds also remain outstanding from 2027 to 2028, and perpetual subordinated bonds amount to RMB3.00bn. In 1Q2026, cash inflow from bond issuance was RMB3.02bn, while cash outflow from debt repayment was RMB5.86bn, indicating that continued market access and refinancing are a premise for the securities company. The fact that it was able to issue multiple low-coupon corporate bonds in 2025 is supportive, but as creditor procedures progress during the merger process, different checks from normal refinancing will be required.

On the basis of the summary, it is possible to confirm only to a limited extent how far proprietary funds and highly liquid assets, excluding customer-related funds, can absorb short-term market funding, repo liabilities and domestic bonds maturing in July 2026. Undrawn committed lines, repo capacity by collateral type, a liability maturity schedule, and details of pledged financial assets remain unconfirmed. For this reason, regulatory liquidity indicators support credit quality, but from a bondholder perspective, stress liquidity on a proprietary-funds basis needs to be confirmed in the next update.

If the merger is completed, the draft plan provides that CICC is expected to assume Dongxing’s liabilities. This could strengthen the issuer base over the long term, but before completion, creditor-protection procedures, cash exit rights, shareholder approvals, regulatory approvals, debt assumption and rating review can affect liquidity and market access. Therefore, from 2026 to 2027, it will be necessary to monitor not only regular financial results, but also merger approvals, creditor announcements and responses to bondholders.

7. Rating Agency View

The international ratings confirmed in this report are not comprehensive long-term issuer ratings for Dongxing Securities itself, but Fitch information related to Dongxing Securities Hong Kong Financial Holdings and Dongxing Voyage Co. Ltd. 5.30% guaranteed bond due 2027 as disclosed in the annual report summary. According to the annual report summary, Dongxing Securities Hong Kong Financial Holdings’ long-term issuer default rating of BBB-, shareholder support rating of bbb-, and the issue rating of BBB- on Dongxing Voyage 5.30% guaranteed bond due 2027 were maintained, while the outlook was changed from Stable to Rating Watch Positive. The reason for the change was CICC’s planned share-exchange absorption merger of Dongxing Securities and Cinda Securities. However, this report has not reviewed Fitch’s original report or the guarantee contract, so the rating target, guarantor and guarantee scope are summarised only on the basis of the annual report summary.

Fitch’s Rating Watch Positive is a positive signal for Dongxing-related offshore ratings. This is because absorption into CICC could integrate the company into a larger and more policy-important securities group. However, a rating watch does not mean that “the merger has been completed”, that “all debt at Dongxing Securities itself has been assigned a direct Fitch BBB- rating”, or that “support is legally guaranteed”. While approvals, closing and post-integration capital and liquidity remain unconfirmed, Rating Watch Positive alone should not be treated as the conclusion of the credit assessment.

As for domestic ratings, this report has not confirmed the latest original reports from rating agencies as of the report date. For investment decisions on Chinese domestic bonds, it is necessary to check domestic-scale issuer ratings, issue ratings, rating outlooks, merger-related rating watches, notching for perpetual subordinated bonds, and the support provider considered by the rating agency. Even if a high domestic rating such as domestic AAA is confirmed, it should be treated separately from international ratings and PRC government guarantees.

The rating-agency view and this report agree that support expectations from the state-owned financial group and the merger event are important credit factors. At the same time, this report separates support expectations, explicit guarantees, merger assumption and individual bond terms, and keeps event risk in the credit view while the merger remains incomplete. This is because, even if rating direction is positive, bondholders still need to verify terms, approvals, creditor procedures and market levels.

8. Credit Positioning

Dongxing Securities’ credit positioning needs to be separated between its standalone position as a “mid-tier securities company within a state-owned financial group” and its potential post-merger position as “part of a larger state-owned securities platform centred on CICC”. As of 2026-05-21, the latter remains conditional, and investors need to assess Dongxing’s credit while the merger is still incomplete.

Compared with CICC or CITIC Securities, Dongxing is weaker in standalone franchise, total assets, revenue scale, overseas reach and depth of international ratings. End-2025 total assets of RMB114bn and operating revenue of RMB4.71bn are sufficient for a mid-tier securities company, but Dongxing should not be placed on the same level as large state-owned or quasi-state-owned securities groups such as CICC or CITIC Securities. Therefore, on a standalone basis, it should be viewed not as a top-tier securities-company credit, but as a mid-tier securities-company credit supplemented by support expectations and regulatory capital indicators.

Viewed as a China Orient-related financial institution, Dongxing has the characteristics of a securities subsidiary of a state-owned AMC. China Orient has a policy role in distressed-asset management and financial asset management, and the shareholding transfer to Central Huijin strengthened the state-owned financial capital restructuring aspect. This gives Dongxing higher support expectations than a normal private-sector securities company. At the same time, the AMC group itself faces issues including credit impairment, capital efficiency and rationalisation of financial subsidiaries, so group strength at the parent consolidated level should not be converted unconditionally into protection for creditors of Dongxing itself.

If the CICC merger is completed, Dongxing’s credit hierarchy could change materially. The surviving company, CICC, has a larger capital base, client base, investment-banking business and overseas platform, and integration of Dongxing and Cinda Securities could increase policy importance and industry ranking. This could be positive for existing Dongxing bonds. However, even after the merger, legal assumption, guarantees, ranking, subordination, terms, ratings, liquidation and recovery structure for individual bonds need to be checked security by security.

This report does not assess market relative value. Bloomberg, live bond prices, yields, OAS, Z-spreads, CDS and comparisons with same-tenor bonds have not been checked. In a practical investment decision, market-level comparisons with CICC, CITIC, China Orient-related financials and other Chinese securities companies of the same tenor and ranking would be required. This report is limited to the credit hierarchy from fundamentals, support expectations, the merger event and bond structure, not pricing.

9. Key Credit Strengths and Constraints

Dongxing’s first support factor is its position within a state-owned financial group. China Orient is the controlling shareholder, and Central Huijin’s emergence as China Orient’s major shareholder places Dongxing within the context of national financial capital restructuring. Because standalone liquidity at a securities company can deteriorate rapidly under market stress, support expectations are important. However, this support is not an explicit guarantee and should be assessed separately from the legal protection of individual bonds.

The second support factor is the earnings recovery and capital strengthening confirmed in 2025. Net profit attributable to shareholders of the parent increased to RMB2.10bn, equity attributable to shareholders of the parent reached RMB33.24bn, and parent-company net capital was RMB28.66bn. Net capital also increased to RMB29.67bn at end-March 2026. For securities-company credit, it is important that earnings accumulate into regulatory capital, and this is clearly positive.

The third support factor is the high level of regulatory liquidity indicators. LCR of 253.97% and NSFR of 198.55% at end-March 2026 indicate headroom in ordinary-course short-term liquidity and stable funding. In addition, the ability to issue multiple corporate bonds and perpetual subordinated bonds at low coupons in the domestic bond market, and the RMB3.02bn of cash inflow from bond issuance confirmed in 1Q2026, support market access.

The fourth factor is the possibility that the CICC merger is completed. This is not currently a confirmed credit enhancement, but rather a positive event factor combined with incomplete-event risk. If completed, Dongxing would be integrated into a larger state-owned securities group, potentially strengthening support in capital, clients, investment banking, overseas capabilities and policy importance. Fitch’s placement of Dongxing-related offshore ratings on Rating Watch Positive also indicates this integration expectation.

The first constraint is dependence on market-based revenue. In 2025, A-share markets, IPOs, bond underwriting, Hong Kong markets and proprietary positions recovered, but these can reverse. The decline in 1Q2026 operating revenue again showed that earnings are not generated by stable deposit-and-loan banking. Proprietary positions, fixed income, OTC derivatives and margin financing generate revenue in normal times, but under stress can generate losses, collateral needs and liquidity outflows.

The second constraint is dependence on short-term market funding and repos. Financial assets sold under repurchase agreements of RMB23.38bn, short-term financing payable of RMB12.14bn, and bonds payable of RMB14.81bn at end-March 2026 assume continued market access. Even with high LCR, liquidity pressure could be amplified if repo markets, bond markets, collateral values, ratings and merger procedures deteriorate at the same time.

The third constraint is incomplete-merger risk. The CICC merger is potentially positive, but it had not yet been approved as of 2026-05-21. Delays in approval, changes in conditions, creditor requests for early repayment, integration costs, friction in personnel, systems and risk management, or deterioration in capital and liquidity at the surviving company could delay the expected credit enhancement or increase uncertainty in the short term.

The fourth constraint is compliance, litigation and reputational risk. The April 2026 Beijing Regulatory Bureau warning letter indicates possible deficiencies in the management and execution of bond business. For a securities company, compliance in investment banking, underwriting, asset management and OTC derivatives can affect future deal origination, regulatory sanctions, compensation, rating assessment and merger review. There is no need to materially downgrade credit quality on the basis of a single warning letter alone, but if similar cases recur or develop into major sanctions, the credit view should be reassessed.

10. Downside Scenarios and Monitoring Triggers

The most realistic downside scenario is simultaneous stress in China’s capital markets. If a sharp equity-market decline, lower trading volume, suspension of IPOs and refinancing, wider bond spreads, interest-rate volatility and lower customer risk appetite occur together, Dongxing would be affected through multiple channels, including wealth-management fees, investment-banking revenue, investment and trading gains and losses, and margin-financing collateral values. The first indicators to monitor are operating revenue, investment income and fair-value changes, margin financing, maintenance margin ratio, risk coverage ratio, repo liabilities and LCR.

The second downside scenario is a deterioration in the funding environment. For a securities company dependent on short-term financing payable, placements from other financial institutions, financial assets sold under repurchase agreements and bonds payable, worsening market funding conditions can pressure liquidity and collateral before earnings are affected. Dongxing has domestic bond maturities in July 2026, which may overlap with the merger process. If the bond market closes, repo haircuts rise, the positive direction of ratings watch is lost, or creditors request early repayment or provision of security, liquidity indicators need to be rechecked.

The third downside scenario is delay, change in terms, or failure of the CICC merger. If the merger is not approved or is materially delayed, the basis for Fitch’s Rating Watch Positive would weaken, and Dongxing would revert to a standalone mid-tier securities-company credit. If terms change, the views of shareholders, creditors and rating agencies would also change. Even if the merger is completed, integration costs, personnel outflows, systems integration, risk-management unification, restructuring of existing positions and legal-entity assumption issues could pressure earnings or liquidity in the short term.

The fourth downside scenario is expansion of compliance, litigation and reputational risk. If the April 2026 warning letter remains an isolated and minor case, the impact on credit quality would be limited. However, if additional regulatory measures, administrative sanctions, litigation, customer compensation or business restrictions arise in bond underwriting, investment banking, asset management or OTC derivatives, they could affect not only earnings, but also merger approval, post-integration assessment, ratings and market funding.

The fifth downside scenario is a retreat in support expectations. The relationship with China Orient / Huijin is supportive, but support is not an explicit guarantee. If the purpose of state-owned financial capital restructuring is to “integrate securities subsidiaries and return AMC groups to their core businesses”, the success of the CICC integration may become more important than direct support to Dongxing itself. If the merger fails and the support stance from the parent or Huijin becomes ambiguous, the credit hierarchy would decline.

The main items to monitor are as follows.

• Progress on approvals by the shareholders’ meetings of CICC, Dongxing, Cinda Securities, China Orient and China Cinda, Shanghai Stock Exchange review, CSRC approval and registration, and other required approvals.
• Creditor notifications, requests for early repayment or provision of security, and assumption or amendment of terms for domestic bonds, perpetual subordinated bonds and offshore guaranteed bonds.
• Operating revenue, investment income, fair-value changes, net profit attributable to shareholders of the parent and ROE in the 2026 interim and third-quarter results.
• Parent-company net capital, risk coverage ratio, LCR, NSFR, and non-equity proprietary securities and derivatives / net capital.
• Handling of the July 2026 maturities of 21 Dongxing G2 and 23 Dongxing G1, additional bond issuance and market funding costs.
• Direction of Fitch’s watch resolution, merger-related actions by domestic rating agencies, and ratings and terms of the Dongxing Voyage guaranteed bond.
• Rectification status related to the Beijing Regulatory Bureau warning letter, additional sanctions, and improvement of internal controls in investment banking and bond business.

11. Credit View and Monitoring Focus

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.

For bond investors, it is practical to treat Dongxing as a “state-owned mid-tier securities credit awaiting the CICC merger”. Before merger completion, the investment decision should focus on Dongxing’s standalone capital, liquidity and debt maturities, together with China Orient / Huijin support expectations. After merger approval but before closing, creditor procedures, early repayment or provision of security, rating watch status and individual bond terms should be checked. After closing, CICC as the surviving company’s capital, liquidity, debt assumption and ratings need to be assessed again.

This report does not make buy, sell or hold decisions based on market prices. Live bond prices, yields, OAS, same-tenor bond comparisons and CDS have not been checked. Fundamentally, Dongxing has stronger elements than a standalone mid-tier securities company because of state-owned support expectations and the merger event, but while the merger remains incomplete, event risk and insufficient confirmation of terms remain. In particular, Dongxing Voyage guaranteed bonds and perpetual subordinated bonds should not be treated as identical to senior bonds at the parent; individual terms and guarantee scope should be checked before making an investment decision.

Conditions for an improved credit view would include the CICC merger obtaining the main approvals, creditor procedures progressing without material liquidity burden, the surviving company clearly assuming Dongxing’s existing obligations, and net capital, risk coverage, LCR and NSFR remaining sufficient after integration. Conversely, a reassessment of the credit view would be required if there are delays in or failure of merger approval, a decline in Dongxing’s standalone earnings, investment and trading losses, deterioration in repo or short-term funding, a major compliance issue beyond the warning letter, a negative direction to Fitch watch resolution, or negative domestic rating actions.

12. Short Summary & Conclusion

Dongxing Securities is a mid-tier full-service securities company in China, with China Orient as controlling shareholder, and since 2025 has moved into the context of state-owned financial restructuring under Central Huijin. Its 2025 earnings recovery, regulatory capital and liquidity, and the planned absorption merger by CICC support credit quality, but revenue is sensitive to market conditions and investment and trading, while the merger remained subject to approvals and closing as of 2026-05-21. Bond investors need to distinguish Dongxing’s standalone profile, China Orient / Huijin support expectations, assumption under the CICC merger, and the individual bond structures of instruments such as Dongxing Voyage.

13. Sources

Primary company and transaction sources

• Dongxing Securities Co., Ltd., 2025 Annual Report Summary, published 2026-03-31.
  https://pdf.dfcfw.com/pdf/H2_AN202603301820864677_1.pdf
• Dongxing Securities Co., Ltd., 2026 First Quarterly Report, dated 2026-04-29 / published 2026-04-30.
  https://dataclouds.cninfo.com.cn/shgonggao/hsomarket/2026/20260429/d2d08d5bf6fe444da530a8acef3ce443.PDF
• China International Capital Corporation Limited, major transaction announcement for the proposed mergers of CICC, Dongxing Securities and Cinda Securities, dated 2025-12-17.
  https://www.hkexnews.hk/listedco/listconews/sehk/2025/1217/2025121701007.pdf
• Shanghai Securities News, CICC share-exchange absorption merger of Dongxing Securities and Cinda Securities draft report summary, published 2026-05-19.
  https://paper.cnstock.com/html/2026-05/19/content_2218351.htm
• Dongxing Securities 2025 annual report full text reference page on Sina Finance / SSE-linked announcement, used to cross-check the annual report source and business description.
  https://money.finance.sina.com.cn/corp/view/vCB_AllBulletinDetail.php?id=12039490&stockid=601198

Rating and secondary public sources

• Fitch rating reference for Dongxing Voyage Co. Ltd. 5.30% guaranteed bond due 2027, as disclosed in Dongxing Securities 2025 Annual Report Summary.
• Fitch public commentary via TradingView / Reuters feed on CICC M&A plan and China securities-sector consolidation, 2025-11-25.
  https://www.tradingview.com/news/reuters.com%2C2025-11-26%3Anewsml_FIT5L6l1H%3A0-fitch-rtgs-china-international-capital-s-m-a-plan-advances-state-led-consolidation/
• Caixin Global public article on CICC advancing the state-backed merger plan, 2025-12-18, used only as a secondary news cross-check, not as a primary numerical source.
  https://www.caixinglobal.com/2025-12-18/cicc-advances-state-backed-merger-to-become-chinas-no-4-broker-102394655.html

Internal structured data

• issuer_summary/issuers/dongxing_securities/data/dongxing_securities_20260521_key_metrics.json

Unverified / Pending