21st Century Business Herald reporter Ye Maisui reported from Guangzhou In the next few days, convertible bonds will usher in a wave of intensive redemptions. If holders of convertible bonds do not sell or convert shares in time, they may suffer large losses, up to or exceeding 62%.
Due to the hot market of convertible bonds last year, there are currently no varieties below the face value of 100 yuan/piece. The convertible bonds with the highest price in the secondary market are China Mining Convertible Bonds, and the latest closing price has been as high as 614.501 yuan/piece.
4 convertible bonds enter the countdown to forced redemption
Recently, Zhengyuan convertible bonds have just completed the forced redemption. On February 17, the company announced that according to the arrangement, the Zhengyuan convertible bonds that have not been converted after the market close on February 17, 2022 will be sold at a price of 100.67 yuan per sheet. After the redemption is completed, Zhengyuan Convertible Bonds will be delisted from the Shenzhen Stock Exchange. Calculated according to the closing price of 162.88 yuan/piece of Zhengyuan convertible bonds on February 17, if investors holding Zhengyuan convertible bonds do not perform any operations, they will lose 38.2%.
The forced redemption of Zhengyuan’s convertible bonds has opened the door to a wave of foreclosures of convertible bonds. This week alone, 4 convertible bonds faced foreclosure, and a batch of convertible bonds ushered in the final transaction, including Biyin on February 22. Convertible bonds, Zhongding Zhuan 2 on February 23, Galaxy Convertible Bonds and Xingshuai Convertible Bonds on February 24, and the “Big Mac” Dongcai Zhuan 3 and Auri which were last traded on February 28 Convertible bonds, as well as Baichuan Convertible Bonds, Tongde Convertible Bonds, and Nuclear Energy Convertible Bonds in early March.
The latest closing price of Biyin convertible bonds is 171 yuan, and its redemption price is 100.42 yuan per piece, a difference of 41.3% between the two. Biyin Lefen also emphasized in the announcement that due to the large difference between the current secondary market price and the redemption price, investors may face losses if they do not convert shares in time. Investors are advised to pay attention to investment risks.
At present, the convertible bond with the highest premium is Galaxy Convertible Bond. The latest closing price is 265.98 yuan/piece, while the redemption price is 100.13 yuan/piece. If the secondary market price of Galaxy Convertible Bond has been stable in this area, it will not be timely. Investors who convert shares or sell convertible bonds will lose 62.4%.
In fact, shortly after the start of 2022, forced redemptions have occurred many times. Such as Binhua Convertible Bonds, Junda Convertible Bonds, etc. Judging from previous convertible bond redemption cases, the vast majority of investors will choose to convert shares or redeem them in time, but there are still a small number of investors who make mistakes.
For example, the Binhua Convertible Bonds that completed foreclosure in January this year. According to the announcement, as of the close of the market on the redemption registration date (January 10, 2022), the balance of Binhua convertible bonds was RMB 9.069 million, accounting for 0.38% of the total issuance of Binhua convertible bonds of RMB 2.4 billion. It will be redeemed by the company at 100.378 yuan/piece, and the total amount of redemption and redemption is 9.103 million yuan. Roughly calculated, the investors of the above-mentioned convertible bonds will directly lose more than 4 million yuan in total.
The share conversion premium rate remains high
Affected by the forced redemption, the convertible bonds have been adjusted recently, and the CSI Convertible Bond Index has fallen by more than 3% since February 11. However, there are still institutions that believe that the valuation of convertible bonds is too high.
Zhang Xu, an analyst at Everbright Securities, said that as of February 11, 2022, there were 387 convertible bonds in stock, with a balance of 679.595 billion yuan. On February 11, the average price of convertible bonds was 129.16 yuan, with a quantile value of 98.59%, which was at a historically high level since 2018. The conversion premium rate is 32.10%, and the quantile value is 98.90%, which is at a high level since 2018; among them, the conversion premium rate of the mid-parity (conversion value between 90 and 110 yuan) convertible bonds is 31.03% , higher than the median (13.86%) of the mid-parity convertible bond-to-equity premium rate since 2018.
Xia Fengguang, a fund manager of private equity Pai Pai.com, also said in an interview with a reporter from the 21st Century Business Herald that the current convertible bond premium rate is still in the high quantile position of the historical quantile, and the convertible bond premium rate is around 36%. According to historical valuation, The conversion premium rate is mostly between 20% and 30%. With the wave of forced redemptions, it cannot be ruled out that there is still a possibility of valuation compression in the market outlook.
However, he also emphasized that there is no need to be too pessimistic about the medium-term prospects of the convertible bond market. First, the attention of the convertible bond market is constantly expanding, and the market’s perception and demand for convertible bonds are in a boom cycle. Second, the downward trend of the average risk interest rate in the market continues. Third, after adjustment, the current major index valuation levels are in a relatively reasonable position. If the underlying stocks of convertible bonds generally bottom out and rebound, it will form support for the valuation of convertible bonds.
Zhang Xu believes that investors can focus on convertible bonds in the following directions in the future: 1. Steady growth direction, and can focus on convertible bonds in green power operation, energy transformation, construction and financial sectors. 2. There have been many adjustments to growth stocks in the early stage, and the valuation of some sectors driven by high prosperity has been relatively reasonable, which is suitable for layout at low points. 3. Pay attention to the annual report market, and seize companies whose performance exceeds expectations and whose difficulties reverse.
Due to the continuous upside last year, there are currently no convertible bonds below the face value of 100 yuan/piece. The convertible bond with the highest price in the secondary market is the China Mining Convertible Bond, and the latest closing price has been as high as 614.501 yuan/piece. There are 9 convertible bonds with a price of more than 300.
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