Core Viewpoint - The merger of China International Capital Corporation (CICC) with Dongxing Securities and Xinda Securities is expected to catalyze a significant rally in the securities sector, with the three companies' A and H shares suspended for up to 25 trading days, impacting the securities ETF market significantly [1]. Group 1: Market Reaction - The securities ETF Dongcai (159692) saw a price increase of over 1% in early trading, with nearly 5.4 million yuan in net subscription funds entering the market, indicating strong buying interest [1]. - The three companies account for 5% of the securities ETF Dongcai (159692), which is the leading ETF in terms of the combined weight of CICC, Dongxing, and Xinda [1]. Group 2: Historical Context and Investor Opportunities - Historical data suggests that major mergers in the securities sector often lead to a broad market rally; for instance, the merger of Guotai Junan and Haitong Securities in September 2023 resulted in a nearly 17% increase in the Shanghai Composite Index during their suspension period [2]. - Investors can leverage the ETF's valuation mechanism to capitalize on potential price increases post-merger, as the ETF will continue to be valued based on the last closing prices of the suspended stocks [3]. Group 3: Sector Valuation and Performance - The current valuation of the securities sector is considered attractive, with the Shanghai Composite Index up 17.75% year-to-date, while the securities sector only increased by 3.73% during the same period, indicating a divergence [4]. - The net profit of listed securities firms is projected to grow over 60% year-on-year in the first three quarters, while the price-to-book ratio (PB_MRQ) of the securities sector is at a historical low of 1.5 times, suggesting that the sector is undervalued compared to its historical performance [4].