Morgan Stanley: Absorption and merger of CICC (03908) with Cinda and Dongxing will help to quickly advance.

Morgan Stanley releases research report stating that CICC (03908) plans to absorb and merge with Cinda (601059.SH) and Dongxing (601198.SH), both of which are under the control of Central Huijin. The details of the exchange ratio are not yet clear, but it is expected that the transaction will be able to proceed quickly due to the common control shareholders. By merging the two smaller brokerage firms, it will complement CICC's wealth management business. Due to limited business overlap, integration costs are expected to be manageable. Morgan Stanley maintains a "overweight" rating for CICC with a target price of 28.9 Hong Kong dollars. Morgan Stanley predicts that CICC's net capital base (approximately 46 billion RMB) could nearly double after the merger, strengthening its leading position in equity and derivatives business. Long-term cost synergies are expected to be achieved. Taking into account CICC's past experience in integrating CITIC Securities and its advantages in trading, risk management, product structure, and institutional client coverage, Morgan Stanley believes that the post-merger capital base can be more effectively utilized.