Changpeng Wan
The Dual Stake Surge That Shook Markets
In a rare synchronized move on July 11, international banking powerhouse Barclays PLC and Chinese fund titan E Fund Management simultaneously acquired major stakes in Zhongzhou Securities – the H-share arm of Henan-based Central China Securities. Their coordinated investments triggered a 47% single-day stock surge for the mid-sized brokerage, spotlighting a wider scramble for Hong Kong-listed securities firms. This strategic alignment between Eastern and Western financial giants centers on virtual asset trading licenses, positioning Zhongzhou as a gateway to crypto infrastructure while exposing Hong Kong’s growing role in China’s financial innovations.
The Mechanics of Dual Acquisitions
Hong Kong exchange filings reveal meticulous timing behind these transformative investments:
- Barclays snapped up 122 million shares at HK$2.95 average price
- E Fund acquired 5.76 million shares at HK$2.864 per unit
- Post-transaction stakes exceeded 12.46% and 5.27% respectively
The dual maneuvers instantly propelled Barclays to become Zhongzhou’s second-largest shareholder while positioning E Fund as the third-largest strategic investor. Such synchronized ‘stake-building’ among competitors is virtually unprecedented in Asian finance circles.
Virtual Asset Licenses: The Core Motivation
Hong Kong’s Regulatory Gold Rush
This stake acquisition occurs amid Hong Kong’s virtual asset trading (VAT) license explosion. Since June, CITIC Securities International became the first Chinese brokerage to secure full virtual asset service authorization. Subsequently, TF Securities International, Northeast Securities, and E Fund’s institutional peers signaled aggressive license applications. Zhongzhou International – through its existing Type 1 (dealing), Type 4 (advising), and Type 6 (asset management) licenses – sits ideally positioned for VAT expansion.
The Unfinalized Advantage
When directly questioned about stablecoin operations, Zhongzhou’s July 16 disclosure noted “currently not involved” status – precisely what makes it attractive. Barclays and E Fund anticipate exponential valuation growth once Zhongzhou activates VAT capabilities, potentially mirroring the 100% quarterly profit surges seen at early-mover brokerages.
Sector-Wide Effects Beyond Zhongzhou
The July 11 dual acquisition triggered domino effects:
- Hong Kong brokerage sector index jumped 19% simultaneously
- Retail trading volume spiked 320% above monthly averages
- AH premium gap reached 72% for Zhongzhou, signaling H-shares’ value
Huatai Securities analysis identifies three catalysts: VAT license anticipation, 50-120% H1 profit growth sector-wide, and chronic H-share undervaluation relative to mainland counterparts. “These structural advantages position Hong Kong brokerages for sustained re-rating,” noted analyst Zhang Wei in the firm’s July sector update.
The Valuation Play: Dissecting H-Share Opportunities
Zhongzhou currently trades at HK$2.79 versus its A-share equivalent at RMB4.39 – maintaining a steep 73% discount after last week’s correction. This gap reflects systematic undervaluation affecting listed Hong Kong brokerages:
| Brokerage | H-Share Price | A-Share Price | AH Premium |
|---|---|---|---|
| Central China Sec | HK$2.79 | RMB4.39 | 72.73% |
| CITIC Securities | HK$26.25 | RMB28.34 | 18.52% |
“H-shares are trading near liquidation value while VAS licenses could triple addressable markets,” said Ming Li, Asian financials strategist at UBS. “China’s top regulators are silently endorsing Hong Kong’s crypto infrastructure to contain capital outflows.”
Strategic Implications & Outlook
Despite recent price pullbacks creating paper losses for Barclays (-5.73%) and E Fund (-2.58%), analysts project 60-80% upside upon formal VAT approvals. Successful implementation would position Zhongzhou as:
- The operating hub for mainland retail crypto investments
- Conduit for Hong Kong’s digital bond settlements
- Bridge between Chinese enterprises and blockchain financing
Global investors should monitor China Securities Regulatory Commission guidance and filing timelines for Zhongzhou’s license expansion. With virtual asset trading volume projected to surpass US$100 billion annually in Hong Kong by 2028, centralized brokers like Zhongzhou offer asymmetric opportunities unmatched in broader markets. Initiate position-building strategies during regulatory confirmation phases.
