Changpeng Wan
The Chronic Non-Execution of a Major Stake Reduction Plan
For the second time in three years, China Cinda Asset Management has allowed its share reduction plan for Founder Securities to expire without selling a single share. This latest non-execution marks the fifth attempt since 2022 by one of China’s ‘Big Four’ state-owned asset management companies to offload portions of its stake acquired through debt settlements. Industry analysts point to persistently unfavorable market prices as the primary culprit, even as Founder Securities announces a 70-80% profit surge. This recurring pattern reveals deeper complexities in China’s financial markets where strategic intentions collide with economic realities.
- China Cinda’s fifth consecutive stake reduction plan lapses with zero shares sold despite a six-month window
- Founder Securities share prices remained below Cinda’s historical sell points during the latest attempt
- The asset manager retains a 7.2% stake despite targeting partial divestments since 2022
- Strong H1 financials from Founder Securities failed to lift shares to Cinda’s target price range
Historical Context of the Stalled Reduction Strategy
The relationship between China Cinda and Founder Securities began in September 2021, when Cinda acquired an 8.62% stake as compensation for debt from troubled shareholder Zhengquan Holdings. This positioned the state-owned bad loan specialist as a significant minority shareholder overnight. Market observers anticipated gradual divestment given Cinda’s mandate focuses on distressed assets rather than long-term equity holdings. Yet what emerged was a pattern of aborted exits.
The Reduction Timeline: Five Attempts, Limited Action
- November 2022: First reduction plan for 2% stake; expired untouched
- July 2023: Second attempt selling 1% of 2% target (¥784M at ¥8.65-10.06/share)
- April 2024: Third effort reduced just 0.15% of planned 1% (¥9.10-9.46/share)
- August 2024: Fourth try sold 0.27% versus 1% goal (¥10.03-10.22/share)
- April-July 2025: Fifth plan targeting 1% (82.32M shares) resulted in no sales
Throughout these stake reduction attempts, China Cinda consistently avoided maximum permitted sales even when executing partial divestments. The two complete non-executions—November 2022 and April-July 2025—bookend a strategy plagued by market timing challenges.
Anatomy of the Latest Failed Sale Attempt
On April 6, 2025, China Cinda formally announced plans to sell up to 82.32 million shares of Founder Securities—approximately 1% of total equity—between April 29 and July 28. At the announcement price of ¥7.82/share, this represented a potential ¥643 million reduction. Market observers immediately noted this was Cinda’s fifth such declaration since acquiring the position.
Price Disparity as Decisive Factor
Founder Securities shares traded between ¥7.28 and ¥8.63 during the recent reduction window, consistently below the ¥8.65-10.22/share range of Cinda’s previous successful sales. This pricing gap appears central to the non-execution. “When institutional investors declare reduction plans but don’t act, it’s often a silent protest against market valuations,” said Shanghai-based securities analyst James Liang. “Cinda has effectively placed a floor price through inaction.”
Persistent Stake Retention
The expiration leaves China Cinda’s ownership at 7.2%—a modest decrease from the original 8.62% holding. Despite multiple reduction announcements, the AMC has relinquished just 1.42% of shares over nearly three years through partial executions. The repeated non-executions point to disciplined price thresholds that current trading levels haven’t satisfied.
The Underlying Financial Dynamics
Founder Securities’ July 14 earnings forecast complicated market perceptions, projecting H1 2025 net profits between ¥2.296-2.432 billion—a 70-80% year-on-year leap. The brokerage credits growth to wealth management services and trading operations, bolstered by China’s financial market reforms. Yet this robust performance failed to elevate share prices into Cinda’s historical sell range during the reduction period.
Market Conditions vs Company Performance
There exists a striking disconnect between Founder’s profitability trajectory and its market valuation. Industry-wide pressures on Chinese brokerages include shrinking commission fees and property market exposure. Guangfa Securities analyst Chen Li noted: “Sector headwinds overshadow individual performance. Even with stellar results, Founder trades at just 1.1x P/B versus the sector’s 1.3x average—discounts that deter planned reductions.”
Strategic Implications for Stakeholders
China Cinda’s selective execution suggests a flexible stance on its non-core investments. AMCs typically resolve distressed assets within five years, yet Cinda maintains discipline on exit pricing rather than artificial deadlines. While the strategy safeguards public assets, it creates overhang risks for Founder Securities as traders anticipate eventual sales.
Operational Constraints
As part of the state-owned financial system, China Cinda faces complex operational considerations:
- Balancing profit targets against policy mandates to stabilize markets
- Managing public scrutiny of state asset management decisions
- Navigating disclosure requirements while positioning stakes strategically
These constraints may contribute to the on-again-off-again approach towards reducing its securities holdings.
Investor Takeaways and Market Signals
Cinda’s non-execution offers positive near-term technical signals for Founder Securities by removing ¥643 million in potential selling pressure. Additionally, the implicit ¥8.65+ price floor signals institutional confidence in valuation support at current levels. However, Sinolink Securities strategist Zhang Yuting cautions: “Temporary relief may give way to renewed uncertainty once Cinda announces its sixth reduction plan—likely before year-end.”
Broader Reform Context
This episode illustrates the contradictory pressures within China’s financial system reforms. While securities firms like Founder pivot toward wealth management – a priority under Beijing’s ‘Financial Powerhouse’ initiative – legacy equity issues persist. The stranded ownership highlights difficulties in unwinding pre-reform entanglements.
Forward Outlook for Stakeholders
Market participants should monitor multiple incoming catalysts:
- Founder Securities’ formal H1 report confirming profit surge projections
- Potential sixth reduction plan announcement from China Cinda
- Broader financial sector reforms impacting brokerage valuations
- Significant index rebalances affecting technical demand
For investors, patience becomes paramount. While Cinda’s price discipline suggests latent upside for Founder shares, recurring non-execution creates portfolio uncertainty. As country risk in China securities evolves, track AMC activity as leading indicators of institutional confidence thresholds.
