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Shares of Yuexiu Capital Holdings hit their daily trading limit after the Chinese investment firm announced plans to reduce its stake in a major brokerage and increase its ownership of a state-owned utilities company based in Beijing.
Yuexiu Capital closed up 10 percent at CNY10.34 (USD1.48) per share in Shenzhen. Meanwhile, the brokerage’s stock dropped 0.6 percent to CNY27.91 in Shanghai and 1.3 percent to HKD27.86 (USD3.57) in Hong Kong, while the utility company’s stock rose 2.2 percent to HKD32.70.
The company revealed late on January 16 that it intends to sell up to 1 percent of its shares of the brokerage listed in both Shanghai and Hong Kong by the end of the year. Based on the brokerage’s market value of CNY416.1 billion (USD57.4 billion) as of January 16, this equals nearly CNY4.2 billion (USD603 million). Such a sale could lead to an investment gain of approximately CNY1.9 billion.
Yuexiu Capital originally acquired a 6.26 percent stake in the brokerage through a share-for-assets deal tied to its 2020 sale of Guangzhou Securities. It later increased its holdings to about 8.5 percent through secondary market purchases and a private placement, making it the second-largest shareholder.
The firm paid an average of roughly CNY15.10 per share, and with the closing price at CNY28.08 on January 16, the investment has yielded a return of about 86 percent, according to a securities analyst.
This move is expected to generate significant investment gains, which will enhance the company’s asset structure and support its focus on high-quality business development.
Financial analysts suggest that reducing its stake while the stock price is high might have a short-term psychological impact on investor sentiment toward the brokerage and similar stocks. However, it is unlikely to affect the company’s underlying fundamentals.
The firm explained that the divestment aims to optimize its finances and realize gains without directly influencing the future operations of the brokerage or the broader industry.
In a separate statement on January 16, the company announced plans to invest up to CNY1 billion (USD144 million) to purchase additional shares of the utilities operator before the end of next year. The goal is to better balance its assets and boost long-term value.
As of January 16, the company held more than 4.4 percent of the utilities provider. This major utility company mainly operates in urban gas distribution, water treatment, waste management, as well as owning a brewery and infrastructure projects like toll roads.
Industry insiders note that utilities tend to provide more stable returns compared to brokerage stocks, which often experience significant cyclical fluctuations. These strategic shifts may indicate a change in the company’s investment approach.
With a price-to-earnings ratio around 7 and a price-to-book ratio below 0.5, the utility’s long-term investment prospects appear promising.
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