(Yicai) Jan. 19 -- Shares of Yuexiu Capital Holdings surged by their daily trading limit after the Chinese investment firm said it plans to cut its stake in brokerage giant Citic Securities and increase its ownership of Beijing Enterprises Holdings, a state-owned utilities operator.

Yuexiu Capital [SHE: 000987] closed 10 percent up at CNY10.34 (USD1.48) per share in Shenzhen today. Citic Securities [SHA: 600030; HKG: 6030] fell 0.6 percent to CNY27.91 in Shanghai and 1.3 percent to HKD27.86 (USD3.57) in Hong Kong. Beijing Enterprises’ stock [HKG: 0392] climbed 2.2 percent to HKD32.70.

Yuexiu Capital will sell up to 1 percent of Citic Securities shares listed in both Shanghai and Hong Kong by the end of the year, the Guangzhou-based company announced late on Jan. 16.

Based on the brokerage’s CNY416.1 billion (USD57.4 billion) market value as of Jan. 16, 1 percent of Citic Securities’ outstanding shares equals nearly CNY4.2 billion (USD603 million), giving Yuexiu Capital an investment gain of about CNY1.9 billion.

Yuexiu Capital acquired 6.26 percent of Citic Securities via a share-for-assets deal tied to its sale of Guangzhou Securities in 2020. The firm subsequently raised its holding to about 8.5 percent via secondary-market purchases and a private placement, making it the broker’s second-largest shareholder.

Yuexiu Capital paid an average of about CNY15.10 per Citic Securities share, Luo Yukang, an analyst at Soochow Securities, told Yicai. Based on their closing price of CNY28.08 in Shanghai on Jan. 16, the investment return is roughly 86 percent, he said.

The move will bring significant investment gains and those funds will help optimize Yuexiu Capital’s asset structure and support its high-quality business development, the firm said.

Yuexiu Capital’s decision to pare its stake in Citic Securities when the stock is high may have a short-term psychological effect on investors in Citic Securities and other brokerage stocks, but it should not affect Citic Securities’ fundamentals, Li Qian, investment advisor at Huiyan Zhitou Technology, told Yicai.

The move is intended to optimize Yuexiu Capital’s finances and realize investment gains, and it should not have a direct impact on Citic Securities’ future operations nor the overall brokerage market, Li noted.

In a separate announcement on Jan. 16, Yuexiu Capital said it plans to invest as much as CNY1 billion buying more shares of Beijing Enterprises before the end of next year, with the aim of optimizing its asset allocation structure and enhancing its long-term asset value.

Yuexiu Capital owned more than 4.4 percent of Beijing Enterprises as of Jan. 16.

Beijing Enterprises is a major utilities operator in China, mainly involved in urban gas distribution, water treatment, and waste management, alongside a brewery business and other infrastructure investments such as toll roads.

Utilities typically offer more stable returns than brokerages, whose shares experience large cyclical swings, a private equity investor focused on Hong Kong stocks told Yicai. These announcements may reflect a shift in Yuexiu Capital’s investment strategy.

With a price-to-earnings ratio of around 7 and price-to-book ratio of under 0.5, Beijing Enterprises has long-term investment potential, the person added.

Editors: Tang Shihua, Futura Costaglione