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Research evidence excerpt

Asia Pacific Equity Research

This material is neither intended to be distributed to Mainland China investors nor to provide securities

investment consultancy services within the territory of Mainland China. This material or any portion hereof

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China/HK First to Market

16 September 2026

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| Guangzhou Auto- H&A, China (Nick Lai)

SOE reform: Beyond the knee jerk reaction Major SOE reform? Guangzhou Auto (GAC) announced this

morning that its H & A shares will be suspended for trading from today due to a pending announcement.

Meanwhile, Bloomberg reported (link) that the Chinese government aims to reduce excess capacity and

enhance industry efficiency through consolidation, whereby a tie-up between FAW (not listed) and GAC is

being considered. While no details are available at the time of writing, we aim to address three strategic

questions in this report: 1) Why consolidation? 2) Who are the potential candidates, from a financial

perspective? and 3) What are the likely scenarios or outcomes? In short, assuming a deal is indeed

proposed between GAC and FAW or other SOE OEM, we would expect: 1) in the short term, a positive

share price reaction for the acquiree,e.g. in this case, potentially GAC based on the news (here), 2) medium

term, the success of the M&A would highly depend on the integration of two different companies, including

culture, management, product, platform, channel and investment. On this, investors might remember two

major similar deals in Asia failed during the restructuring stage in 2025, namely Dongfeng Motor and

Changan Auto (news here), and Honda and Nissan (here), and 3) longer term, whether the combined entity

(in this case, assuming FAW and GAC, whose own brand PV businesses are not profitable) can really be

competitive in the domestic and global market place is another question.

China: August data shows increasingly K-shaped divide, China (Tingting Ge)

IP jumped on export strength, domestic demand weak

August activity data were mixed, with a widening gap between production vs. domestic demand.

…