Author丨Leaf wheat ear
Editor丨Zeng Fang
Convertible bonds, which were once considered to be "offensive and defensible", have also fallen into an embarrassing situation of large-scale destruction. As of the close of trading on April 19, there were 52 convertible bonds with prices below 100 yuan, accounting for 1/10. Compared with the same period in 2023, there has been a significant increase in the number of convertible bonds that have fallen below par recently.
The price of 10 convertible bonds is less than 80 yuan per bond
As a variety of convertible bonds that are both offensive and defensive, the offensive nature is reflected in the low premium rate of the convertible bond and the strong substitution effect of the underlying stock, while the defensive nature is reflected in the low price of the convertible bond and the "guarantee" of the debt bottom. In the past few decades, investors' "double-low strategy" has basically been tried and tested, but since 2023, with the normalization of delisting, convertible bonds such as Sote convertible bonds and Blue Shield convertible bonds have left the market after heavy losses, and the strategy has begun to "fall out of balance".
Zeng Hengwei, a partner of Paipaiwang Wealth Management, said in an interview with reporters that the large area of convertible bonds falling below par value is mainly due to the combined effect of many factors. First of all, the overall market environment is not good, especially for convertible bonds issued by companies with weak fundamentals, their prices have been greatly impacted. Second, the implementation of the new delisting rules has exacerbated the credit stratification of the market, and investors are cautious about convertible bonds issued by companies with poor qualifications. In addition, a combination of low market confidence, tighter liquidity, and concerns about the future economic outlook contributed to the decline in convertible bond prices.
The new "Nine Articles" are also one of the driving forces behind the recent adjustment of debt swaps. Zhai Tiantian, an analyst at Oriental Jincheng, believes that the new "National Nine Articles" issued on April 12 indicate that the mainland's next step in the construction of the capital market system will be to strengthen the market investment function. The convertible bond market, as an important supplement to the development of the capital market, will also be affected by it. Specifically, the new "National Nine Articles" will improve the issuance and listing standards and strict mandatory delisting standards, which will drive the continuous improvement of the quality of issuers in the convertible bond market in the long run, and accelerate the removal of poorly operated listed entities in the short term, and promote the reshaping and adjustment of the pricing logic of the convertible bond market, especially high-risk convertible bonds, and the credit quality and default recovery rate of listed companies may be given greater consideration in the pricing of convertible bonds.
The new "National Nine Articles" strengthen the dividend management of listed companies, restrict the reduction of major shareholders in listed companies that have not paid dividends for many years or have a low dividend ratio, and implement risk warnings, and take multiple measures to promote the increase of dividend yields, which will continue to benefit the high-dividend swap in the short term and further enhance the long-term allocation value of dividend swaps. The new "National Nine Articles" emphasize the promotion of listed companies to enhance their investment value, which will help improve the attractiveness of the convertible bond market to long-term allocation of funds, and at the same time vigorously promote the entry of medium and long-term funds into the market, which will also help to weaken the short-term disturbance of short-term speculative transactions on the convertible bond market, and further enhance the stability and overall allocation value of the convertible bond market. However, the new "Nine Measures" emphasize that the key service areas and directions are highly consistent with the convertible bond market, and it is expected that the convertible bond market will still play a positive role in supporting the development of the private economy, serving scientific and technological innovation, and specialization, refinement, and innovation.
As of the close of trading on April 19, 52 of the 536 convertible bonds in trading fell below the face value of 100 yuan, accounting for nearly 1/10. The price of China Installation Transfer 2 is the lowest, only 61.1 yuan/piece as of the close, and it is also the only convertible bond that has fallen below 70 yuan/piece.
According to the data, the credit rating of China Loading Transfer 2 is "A", and the bond term is 6 years (0.30% in the first year, 0.50% in the second year, 1.00% in the third year, 1.50% in the fourth year, 1.80% in the fifth year, and 2.00% in the sixth year), and the corresponding name of the underlying stock is ST Zhongshang, and the start date of the transfer is October 22, 2021, and the transfer price is 5.14 yuan. The latest conversion premium is 89.19%.
In second place is the Diou convertible bonds, with a closing price of 70.05 yuan per bond on April 19. In addition, the closing price of 8 convertible bonds, including the majority of convertible bonds and three-house convertible bonds, is below 90 yuan per piece. In total, there are 10 convertible bonds whose closing prices are lower than 80 yuan per bond.
At present, the highest price of the convertible bond is Jincheng convertible bond, with a closing price of 492.936 yuan per bond. At the time of the most prosperous convertible bonds, there were many convertible bonds such as quartz convertible bonds and Yingke convertible bonds, which rushed thousands of yuan per piece. Among them, the Yingke convertible bond was set a historical record of 3618.188 yuan per piece on January 25, 2021, and this record has not been broken so far.
Institutions reduced their holdings of convertible bonds in the fourth quarter of last year
As of the end of the fourth quarter of last year, the market value of convertible bonds held by public funds and the participation in convertible bond holdings both declined slightly, ending the trend of increasing positions in the past one year.
According to the research report of Minsheng Securities, the market value of convertible bonds held by public funds reached a new high of 330.615 billion yuan at the end of the third quarter of last year, and in the fourth quarter, it fell for the first time in nearly two years, down 5.29% from the previous quarter, and the market value of convertible bonds fell to 1.15% of the fund's net asset value, down 0.06 percentage points from the previous quarter. The participation of public fund convertible bond holdings, which is measured by the market value of convertible bonds held as a proportion of the balance of existing convertible bonds, declined for the first time in nearly one year, falling to 36.15% in the fourth quarter of last year, down 1.72 percentage points from the previous quarter, and lower than the high of 38.33% at the end of 2021, which is at a historical low.
Tan Yiming, a fixed income analyst at Minsheng Securities, said that the mixed contribution of partial debt increased the allocation of convertible bonds, while the secondary bond base and convertible bond funds reduced their positions significantly. As of the end of last year, the market value of convertible bonds held by the secondary bond base fell to 149.653 billion yuan, a decrease of 10.793 billion yuan or 6.73% from the previous month. Convertible bond funds also significantly reduced their holdings of convertible bonds by 6.835 billion yuan, with the market value of their holdings falling to 49.965 billion yuan, a decrease of 12.03%, and the market value of convertible bonds held by the primary bond base fell slightly by 2.46% to 56.978 billion yuan. Partial debt hybrid and flexible allocation funds increased their holdings of convertible bonds by 4.020 billion yuan and 953 million yuan respectively.
From the perspective of marginal changes in industry distribution, the market value of convertible bonds held by public funds has shrunk significantly, but in terms of holdings, public funds have increased their holdings of convertible bonds in 18 industries month-on-month, and significantly reduced their holdings in media, public utilities, computers, communications, banks, iron and steel and other industries; Among them, petrochemical, environmental protection, building materials, automobiles, military industry, light industry manufacturing and other industries have shown the phenomenon of "volume increase and market value decrease" due to the correction of bond prices.
From the changes in the allocation of convertible bond positions, it can also be seen that the adjustment of institutional investment direction.
Jia Jian of E Fund believes that the market has rebounded after the Spring Festival, but the overall valuation is still at a relatively low historical level, and the cost performance of growth stocks is more prominent. At present, the investment idea is more inclined to start from the meso-industry, and the main investment direction is "energy reform" and "domestic substitution", and actively look for new directions that are expected to achieve "productivity steps". The current position is optimistic about the direction of "energy transformation", which is a continuous process of decades, during which the level and sustainability of industrial opportunities will not be affected by the current stock price retracement.
For the next investment strategy, Zeng Hengwei believes that firstly, the double-low strategy can still be used as an important reference index, that is, to choose convertible bonds with low prices and low conversion premiums, in order to pursue returns under the premise of controllable risks; secondly, pay attention to the downward revision clause game, invest in those convertible bonds with downward revision potential, in order to obtain potential value enhancement; in addition, choose convertible bonds with positive after-tax maturity yields, even if the market fluctuates, it can ensure certain returns; at the same time, diversify investments to reduce the risk of a single bond; fundamental analysis is equally important, and it is necessary to conduct in-depth research on the financial situation and market prospects of the issuing company; and when the stock market valuation is reasonable, consider using a gamma strategy to profit from market volatility, and last but not least, avoid investing in convertible bonds that have a significant risk of default or other problems. In short, investors need to carefully assess the risks when buying convertible bonds, formulate appropriate investment strategies based on market conditions and personal investment objectives, and pay close attention to market dynamics to adjust strategies to cope with changes.
SFC
Editor: Liu Xueying, intern: Dong Danlin
How long can the bond market continue to go quietly?
Six major banks, large-scale bond issuance!
The "Domino Effect" of Ultra-Long-Term Special Treasury Bond Issuance
