Huaxing Capital 2.0: Declaration of the Era and Value Discovery

Executive Summary

Huaxing Capital Holdings Limited ($Huaxing Capital Holdings (01911)$) is at a critical strategic turning point. The company is leveraging its dominant financial ecosystem in China’s “new economy” sector to pioneer a regulated, crypto-powered model of investment banking. Recently, the company appointed senior experts from the Web3 field to its board and announced a budget of $100 million dedicated to developing its digital asset business, signaling a clear move in this strategic transformation. This action not only directly responds to changes in the global macroeconomic landscape but also represents a significant growth vector that is severely underestimated by the market.

The current market valuation of Huaxing Capital remains at the level of a traditional investment bank experiencing cyclical difficulties. This viewpoint completely overlooks the company’s rock-solid balance sheet (notable net cash position and negative enterprise value), the immense value embedded in its private equity investment portfolio (evidenced by the successful IPO of its investment Circle), and its unparalleled full-license moat.

There is a significant disconnect between Huaxing Capital’s valuation and its actual value. This disconnect presents a highly attractive opportunity for value rediscovery. As Huaxing Capital’s 2.0 strategy gradually unfolds, its intrinsic value is being re-recognized by the market, making a significant valuation correction not only possible but also highly likely.

Introduction: A Catalyst for a New Era

Public Declaration

On June 26, 2025, an announcement released by Huaxing Capital is of far greater significance than a routine personnel and strategic update; it resembles a meticulously calculated strategic declaration, marking the beginning of a new development phase for the company.

Human resources are strategy: The appointment of Mr. Frank Fu Kan is a personification of the new strategy. His resume is crucial, covering not only traditional tech giants (like Meitu) but also major players in the crypto-native world (like Distributed Capital and Huobi). This indicates that Huaxing Capital is not merely dabbling in blockchain, but is integrating profound and actionable Web3 genes into the company’s highest governance level.

Capital is a commitment: a budget commitment of up to $100 million has pushed this strategy from a theoretical level to practical operation. The clear allocation of the budget—stablecoins, real-world assets (RWA), and a complete digital asset ecosystem—reveals a mature, infrastructure-centric layout approach, rather than speculative bets on highly volatile cryptocurrencies.

This announcement declares the official launch of the “Hua Xing 2.0” era. This report will demonstrate that this is a well-considered evolution of its validated business model, aimed at building a lasting competitive advantage for the next decade. Its core objective is to become a fully regulated central intermediary that connects the flow of capital and innovation between the traditional world (Web2) and the decentralized world (Web3).

Carefully Selected Strategic Timing

Huaxing Capital has been laying out its strategy in the digital asset field for many years, such as its participation in the listing of Canaan Technology in 2019 and its investment in Amber Group in 2021. So, why choose to make such a significant public strategic announcement at this moment? Behind this is a well-considered strategic consideration.

First of all, this declaration follows the maturation of two key external factors: one is the star project in the Huaxing investment portfolio - the globally leading stablecoin issuer Circle Internet Group - successfully completing a highly publicized initial public offering (IPO); the other is that the regulatory framework for stablecoins in the Hong Kong Special Administrative Region is becoming increasingly refined and clear.

Circle’s successful IPO provides a strong and public “proof of concept” for Huaxing Capital’s investment vision in the crypto space. This is not only a huge financial success but also an excellent demonstration of “letting facts speak for themselves,” laying a solid foundation for the credibility of its new strategy.

At the same time, the new regulatory rules in Hong Kong provide necessary legal certainty and institutional support for listed financial institutions like Huaxing. Operating in a clear and compliant environment is Huaxing’s core differentiating advantage compared to many native crypto competitors. The clarity of regulation allows Huaxing to “go all out” without worrying about legal risks. Therefore, this announcement is not a passive response, but a strategically timed offensive launched under the dual benefits of having successful cases and regulatory certainty.

Chapter 1: Foundation - Deconstructing the Flywheel Effect of Huaxing 1.0 Era

1.1 Architecture of the Ecosystem

The early success of Huaxing Capital did not stem from the excellence of a single business, but from the self-reinforcing loop formed between its carefully constructed three core pillars. This loop has allowed it to occupy a central position in the financing wave of China’s new economy.

Pillar One: Financial Advisor (FA) - Trading Flow Engine: Since its establishment in 2005, the financial advisory business (private financing, merger and acquisition consulting) has been the entry point for Huaxing into the market. It has deeply rooted Huaxing in the thriving technology startup circle, enabling it to have unparalleled access to the most promising entrepreneurs and startups. This is Huaxing’s “scout” department, responsible for discovering future industry champions.

Pillar Two: Investment Management (IM) - Value Capture Engine: Founded in 2013, Huaxing Growth Capital has become the company’s “Investment” department. The high-quality targets identified by the FA business are invested in by the IM fund, thereby capturing the value brought about by the rapid growth of these companies. This has allowed Huaxing to accumulate a valuable investment portfolio composed of equity in high-growth technology companies. The success of these funds is measured by their outstanding Distributed Paid-In (DPI) and considerable Carried Interest, making them an important source of revenue for the company, especially during market downturns, when their value becomes even more pronounced.

Pillar Three: Wealth Management (WM) and Securities Business - Capital Circulation Engine: The wealth management business launched in 2019, together with Huaxing Securities, constitutes a closed loop of capital circulation. They serve successful entrepreneurs and high-net-worth individuals created by the FA and IM businesses, managing their wealth and directing it back into Huaxing’s ecosystem, where these funds are often reinvested into Huaxing’s own funds. This not only creates high-stickiness customer relationships but also provides the group with a stable source of proprietary capital.

1.2 The Kinetic Energy of the Quantitative Flywheel

The historical financial data clearly demonstrates the strong momentum and high resilience of the model.

Peak Performance (2020): In the bull market year of 2020 for technology stocks, Huaxing’s various business segments worked together synergistically. The investment management division’s revenue soared by 128%, the investment banking division’s revenue reached a historic high, and the net profit attributable to the parent company achieved an astonishing growth of 320.5%. This fully demonstrates the immense acceleration potential of the flywheel in a favorable market.

Resilience during the Downturn Cycle (2022-2023): As we entered 2022, the global IPO market was frozen, impacting investment banking revenue. However, the contribution of the investment management segment to the group’s total revenue increased, reaching 53%. This was mainly due to its stable management fee income and a year-on-year surge of 1,296.3% in realized ancillary equity income. This strongly demonstrates that the value created and locked in the investment management arm over the long term provides a crucial buffer for the group against the cyclicality of investment banking business. The flywheel can not only accelerate but also store momentum.

The information advantage moat created by business collaboration.

Traditional investment banks typically operate their departments such as mergers and acquisitions, private equity, and wealth management separately, leading to poor information flow between departments and creating “information silos.” Huaxing Capital’s model, on the other hand, inherently possesses integrated advantages. This structural synergy has built an insurmountable information advantage moat for them.

The operational logic is as follows: first, the financial advisory team is able to gain deep insights into the operational details, competitive landscape, management capabilities, and other core non-public information of the startup company while providing private equity financing consulting. Secondly, this high-quality proprietary information from the front lines can be directly delivered to the investment management team. This gives Huaxing’s investment decisions a significant information advantage compared to competitors who can only conduct due diligence from the outside. Furthermore, these successful investments based on information advantages provide the wealth management team with the most convincing “ammunition”. When they recommend investment opportunities in the new economy sector to clients, they are not just selling products; they are sharing their company’s unique insights as “industry builders.”

Ultimately, this model forms a positive cycle: FA business brings in higher quality project sources, IM business makes more precise investment decisions, and WM business attracts stickier clients and capital. Huaxing is not just acquiring trading flow; it is acquiring “smarter” trading flow. This flywheel is essentially an efficient information collection and processing machine, allowing every link of the business to make better decisions, thereby creating a compound advantage that is difficult for isolated competitors to replicate and sustainably accumulate.

Chapter 2: New Engine - Forging the 2.0 Era Flywheel of “M&A + Asset Management + Crypto”

2.1 Upgraded Architecture

Introducing encryption technology and strengthening the merger and acquisition business is not to replace the old flywheel, but to inject stronger power into it, making it “turbocharged”. The three new pillars of Huaxing 2.0 era are: [Strategic Mergers and Acquisitions] + [Crypto-enabled Asset Management] + [Digital Asset Ecological Services].

Strategic Mergers and Acquisitions as a Hub: M&A activities have been elevated to a new strategic height, no longer merely a consulting service, but rather the central node of the entire 2.0 ecosystem. It is the core mechanism for orchestrating liquidity events for portfolio companies, integrating industry resources, and creating new scalable platforms. These new platforms born from M&A will become potential clients for all other businesses of Huaxing. In the company’s 2.0 era blueprint, artificial intelligence and mergers and acquisitions are explicitly listed as core driving forces.

Asset management empowered by cryptocurrency: this is the core of model innovation.

Service Investment Portfolio Company: Huaxing can now provide advanced financial management solutions to its vast network of new economy enterprises. For example, using stablecoins to help them efficiently manage global cash flow, or offering consulting and assisting them in tokenizing illiquid assets (such as real estate and intellectual property) to revitalize their balance sheets.

Limited Partners (LP)/Investors: Huaxing is able to design and launch more innovative fund products, such as funds that directly invest in digital assets or hybrid funds that connect Web2 and Web3. The tremendous success of Circle’s investments will serve as a powerful business card to attract capital towards these new strategies.

Digital asset ecosystem services: This is a brand new, high-margin service layer.

Leveraging its extensive FA experience, Huaxing can provide top-notch consulting services on token economics, financing strategies, and compliance pathways for Web3 projects, just as it has done for HashKey Group. Utilizing its comprehensive licensing advantages, Huaxing is capable of serving as a bridge connecting DeFi (decentralized finance) and TradFi (traditional finance), providing compliant custody, trading, and asset management services for digital assets.

2.2 Practice of the New Flywheel: Circle Case Study

The investment in Circle and its eventual successful IPO is a perfect interpretation of the flywheel model of the 2.0 era.

Investment (IM): Huaxing’s investment management department has made a forward-looking investment in a key link of Web3 infrastructure.

Exit and Value Realization (IB/Capital Markets): Huaxing’s ecosystem has enabled the company to complete an extremely successful IPO, achieving over 8 times the investment return. This has brought substantial cash returns and associated equity income to the fund.

Circulation and Reinforcement (Group Level): The cash generated and the reputation earned are reinvested into the ecosystem. The announced $100 million strategic budget is likely partially sourced from such successful exits. This iconic victory also enhances Huaxing’s appeal in raising the next round of cryptocurrency-themed funds.

Creating New Business (FA/WM): Circle’s public success will make every company in Huaxing’s investment portfolio start thinking, “How can we leverage stablecoins and digital assets?” This creates a huge, ready-made internal market for Huaxing’s new consulting services.

The transformation from service provider to ecosystem architect

The model of the Huaxing 1.0 era is centered on providing financial services (consulting, investment) to enterprises within a specific ecosystem (China’s new economy). In contrast, the model of the 2.0 era involves proactively building the infrastructure for the next era’s ecosystem.

Huaxing’s investments and collaborations with companies such as Circle (payments), HashKey (exchange), Amber Group (asset management), and Bitdeer (mining) have transcended the simple notion of “picking winners.” This represents a deeper strategic layout, aiming to hold equity in the core “pipeline system” of the digital asset economy.

This transformation means that Huaxing is repositioning itself from a purely service provider to a “central bank” and “clearing house” in the migration process of its new economy client base to Web3. It not only provides consulting advice to clients but also offers the underlying tracks on which they rely for their operations, thereby capturing value at every stage of the value chain. This marks a fundamental shift in the company’s business model from the traditional “fee-for-service” to a more sticky and sustainable “platform revenue” model.

Chapter Three: The Strategic Necessity of Digital Assets: In a Multipolar World

3.1 Macroeconomic Logic: Beyond Technical Speculation

Huaxing’s cryptocurrency strategy is not about chasing technological trends, but is rooted in profound macroeconomic insights, elevating it from a tactical choice to a strategic necessity.

Changing Global Order: The world is evolving towards a multipolar pattern, and the system of the US dollar as a single hegemonic currency faces potential challenges. For globally oriented Chinese tech companies (the core client base of Huaxing), excessive reliance on a single currency system brings dual risks of geopolitics and finance. Corporate treasury management is seeking diversification, which has become an inevitable trend.

Stablecoins as a treasury solution: Stablecoins, especially those backed by compliant reserves like US dollar stablecoins, provide businesses with an efficient, low-cost, 24/7 cross-border payment and treasury management tool. They are practical tools for CFOs to diversify settlement channels and enhance capital efficiency.

RWA: The Next Trillion-Dollar Market: The tokenization of Real World Assets (RWA) is widely predicted to grow into a massive market worth trillions of dollars. It represents the biggest opportunity to bring real-world value onto the blockchain, capable of unlocking significant liquidity for traditional illiquid assets such as real estate, private credit, and private equity. For institutions like Huaxing, which hold a large amount of such assets on their balance sheets and within their funds, RWA is a revolutionary technology.

3.2 Hong Kong: Regulated Compliance Gateway

This is one of Huaxing’s key advantages. It is not chasing trends in a regulatory vacuum, but rather building on a solid, government-recognized compliance foundation.

Comprehensive legal framework: Hong Kong’s stablecoin regulatory regulations possess a series of clear characteristics, including a strict 100% reserve backing requirement, independent third-party audits, a clear redemption policy, and a stringent licensing system supervised by the Hong Kong Monetary Authority (HKMA).

Eliminating risks for institutional participants: This certainty in regulation is precisely the prerequisite for institutional capital to enter the digital asset space. It transforms stablecoins from a speculative crypto asset into a regulated financial instrument. Huaxing Capital publicly commits to operate within this framework, enabling it to become the most trusted partner for global institutions seeking compliant digital asset exposure.

The cooperative stance of the “sandbox” mechanism: The “regulatory sandbox” program launched by the Hong Kong Monetary Authority demonstrates a cooperative and innovation-encouraging attitude from regulatory agencies. This allows institutions like Huaxing to explore and develop their innovative products in close cooperation with the government.

Hong Kong’s unique position builds a global moat for Huaxing.

Regulation of digital assets in the United States and Europe remains fragmented and uncertain. Mainland China has implemented strict restrictions on cryptocurrencies. Against this backdrop, Hong Kong, with its unique “one country, two systems” position, has created a unique “regulatory oasis”—one that is closely linked to the global financial system while also receiving understanding and support from the central government.

Huaxing Capital, with its strong foundation in mainland China and comprehensive licenses in Hong Kong, is one of the few financial institutions that can operate comfortably and compliantly in this unique hub. This unique position allows Huaxing to play a key bridging role: on one hand, it can serve as a regulated major channel for mainland Chinese capital to access the global digital asset market; on the other hand, it can also guide global capital through Hong Kong, entering the thriving Web3 ecosystem in Asia safely and compliantly.

This competitive advantage, created by a combination of geographical location and regulatory environment, is difficult for Western investment banks to replicate due to their lack of a Chinese background, and it is also unattainable for financial institutions in mainland China due to their lack of global licenses. This is a unique and lasting moat.

Chapter Four: Huaxing’s Endowment: Unique Advantages Born for Success in Web3

4.1 Unmatched License Moat

This is one of the cornerstones supporting Huaxing Investment’s argument. Huaxing has an extremely rare and powerful license portfolio that covers major global capital markets such as mainland China (under the CEPA framework), Hong Kong (SFC), the United States (FINRA), and Singapore (CMS).

This combination of licenses enables it to legally provide a seamless, end-to-end service chain: it can offer consulting for a technology company in Beijing (Chinese license), assist it in raising USD from global funds (U.S. license), arrange its listing in Hong Kong (Hong Kong license), manage the founder’s family wealth in the regional hub of Singapore (Singapore license), and now, it can also leverage its Hong Kong license to assist the company in treasury management using stablecoins. Almost no other institution can provide such an integrated, cross-border, and fully compliant service.

4.2 An embedded, ready-made ecosystem

Huaxing’s most valuable asset is its existing client network. It did not start from scratch. Its portfolio and client list can be regarded as the “who’s who” of China’s new economy. These companies are precisely the group that most needs the global asset management and liquidity solutions that Web3 technology can provide.

This network provides a ready-made, high-quality customer base for Huaxing’s new digital asset business, significantly reducing customer acquisition costs and creating immediate cross-selling opportunities.

4.3 Forward-looking in the cryptocurrency field cultivated for many years

Huaxing’s entry into the cryptocurrency field is not a spur-of-the-moment decision, but the inevitable result of years of strategic and successful investments.

Proof of the portfolio: By sorting through its key investments in the crypto space, a clear logical thread of investing in core infrastructure can be identified.

2019: Led the participation in the NASDAQ listing of Canaan Creative (mining machine manufacturer).

2021: Led the B round financing of Amber Group (a digital asset platform and liquidity provider).

2022: Invested in Matrixport and assisted Bitdeer (financial services and mining) in going public.

2024: Serving as the financial advisor for financing at HashKey Group (licensed exchange).

2025: The invested company Circle (a leading compliant stablecoin issuer) successfully goes public.

This investment record proves two points: first, Huaxing has the professional ability to identify and support infrastructure-level winners in this field; second, it has a history of over five years in establishing relationships and accumulating expertise in this area.

4.4 Leadership: Integrating Native Expertise

The appointment of Frank Fu Kan is the final piece of the puzzle. It indicates that this new strategy is driven by genuine, profound domain expertise, rather than being dominated by traditional bankers who merely read blockchain reports. His experience leading Huobi US, along with his partnership at Distributed Global, one of Asia’s most renowned blockchain venture capital firms, brings unparalleled industry credibility and insider networks to Huaxing.

Chapter Five: A Case of Obvious Value Rediscovery

5.1 Short-sightedness in the market: pricing for the past rather than the future

The current market pricing for Huaxing is entirely based on the cyclical lows it experienced in 2022 and 2023, when the company’s revenue and profits were impacted by macroeconomic headwinds and a frozen IPO market.

The current stock price reflects a narrative of a “troubled Chinese investment bank,” completely overlooking the solid value fortress on its balance sheet and the transformative potential inherent in its 2.0 strategy.

5.2 Rock-solid balance sheet: Growth platform

The following is a quantitative analysis of the financial condition of Huaxing Capital.

High cash, no debt: As of the end of the 2023/2024 fiscal year, the company has a significant cash position and very low, even zero, debt levels. Historical financial reports show that the company actively repaid syndicated loans, continuously reducing its debt levels.

Negative enterprise value: The enterprise value of the company is negative, which means that its market value is even lower than its net cash on the books. Essentially, investors are buying Huaxing’s stock now, which is equivalent to acquiring all of its operating assets— including all licenses, customer ecosystems, brand reputation, and a large private equity investment portfolio— at a price below its net cash.

Extremely low price-to-book ratio: The company’s price-to-book ratio (P/B Ratio) has remained at an extremely low level for a long time, approximately 0.3-0.4 times, indicating that the market values its assets at only a third of their accounting book value.

5.3 The Hidden Value of the Portfolio: The Precedent of Circle

The company’s book value itself is also underestimated. Private equity investments are usually recorded at cost or at a conservative fair value.

Circle’s successful IPO is “conclusive evidence” of this. An exit return of over 8 times eloquently demonstrates the true economic value of Huaxing’s private equity portfolio, which is far higher than the figures reflected on its balance sheet.

It can be reasonably inferred that there are many potential “Circles” in Huaxing’s vast portfolio of new economy leaders. Additionally, the massive unrealized contingent equity accumulated on its books represents a high-margin cash flow that has not yet been fully priced by the market.

Conclusion: The Intersection of Strategy, Timing, and Value

Ultimately pointing to a clear conclusion: Huaxing Capital is not just a “cheap stock”; it is a high-quality financial institution with a high degree of strategic agility, and the market is selling it at a deep discount.

This is a highly asymmetric investment opportunity. Its downside risk is effectively protected by the company’s strong balance sheet and net cash position. Its upside potential is driven by three powerful catalysts that are not fully recognized by the market:

Periodic recovery: Its core investment banking business will revive as the market warms up.

Value Release: The immense potential contained in its private equity portfolio, valued at tens of billions of dollars, will be gradually unlocked.

Exponential Growth: The exponential growth potential brought by its new, regulated, and significantly synergistic “Huaxing 2.0” digital asset strategy.

Huaxing Capital represents a rare intersection of deep value, a clear strategic transformation, and a strong competitive moat. As the market gradually recognizes the true strength of its 2.0 era flywheel, a significant reassessment of the company’s value is not only possible but inevitable.

The value rediscovery of the market may be delayed, but it will not be absent.