JP Morgan reiterates that CICC is the top choice among Chinese brokerage stocks, expecting H shares to outperform A shares in the short term

JP Morgan published a research report indicating that CICC (03908.HK) announced plans to merge Dongxing Securities (601198.SH) and Xinda Securities (601059.SH) through a share swap. Based on the proposed swap ratio and the latest closing prices, JP Morgan expects arbitrage opportunities may arise in the A-share market, where investors might buy Dongxing Securities and Xinda Securities while shorting CICC A shares. Therefore, it believes that CICC H shares may outperform CICC (601995.SH) A shares in the short term.

JP Morgan noted that from November 19 to date, the average price of H-share brokerage stocks covered by the bank has risen by 0.2%, compared to a decline of about 1% in the Hang Seng Index during the same period. It currently expects CICC H shares to outperform peers and continues to list them as a preferred stock in the Chinese brokerage sector, with a rating of "Overweight" and a target price of HKD 21.2. The bank pointed out that the Hong Kong IPO market is recovering, coupled with a more favorable market environment, which should positively impact fee income and investment income over the next 12 months. It expects the price-to-book ratio of CICC H shares to trend towards the mean, and potential merger news and market developments could influence stock price performance over the next 12 months