Shares of China Galaxy Securities (CGS) surged 16.31% on Wednesday, as the company is set to merge with state-owned peer China International Capital Corp (CICC) to form China's third-largest brokerage with $193 billion in assets.

The merger, which has secured backing from Chinese authorities, would create a combined entity with 1.4 trillion yuan ($193 billion) in total assets, surpassing Huatai Securities to become the country's third-largest brokerage. Both CGS and CICC count China Investment Corporation as their biggest shareholder and parent.

The deal aims to establish larger and more competitive domestic investment banks to counter the growing presence of global banks like Goldman Sachs and Morgan Stanley in China. The merged entity is expected to navigate the challenging market conditions better, amid a slowing economy, market weakness, and regulatory tightening in the financial sector.