Convertible Bond "Magic Market": Strong Redemption Announcement Triggers Another Rise In Convertible Bonds "Roller Coaster" To Fight New Arbitrage Risks

The day before rose 55.9%, second days plunged 53%, 50 times a day to change hands... Convertible bonds have recently staged a wave of "magic market".

In March 11th, "net red" rose again in a single day, triggering a temporary shutdown and fusing, and resumed trading in the 3 minutes before closing, down 23.75%, or narrowed from 30.02% to 6.27%.

This is not surprising under the trading rules of convertible bonds.

In addition, since the beginning of this year, the new enthusiasm of convertible bonds has further increased, and the success rate has been lower. In the two tier market, various investment strategies, such as arbitrage and hedging, are also derived from the T+0 trading system such as convertible bonds.

However, the risk can not be ignored.

"Magic" ups and downs

The rise of convertible bonds has become the latest "net red".

In March 4th, the 4 straight trading days rose again, with a cumulative increase of 174.63%. In March 9th, it rose 55.9% to 401.26 yuan. However, it fell by 53% in March 10th.

In March 11th, it continued to "go crazy". Around 10 a.m., it rose more than 20%, triggering a temporary suspension of trading and halting for half an hour. However, the opening rate of midday trading reached 30.02%, triggering the suspension mechanism and resuming trading at 14:57.

However, only 3 minutes after the resumption of trading, the rise in debt increased from 30.02% to 6.27% and 3 in 3 minutes. By the end of March 11th, the conversion premium rate of the convertible bonds fell to 6.75%, and the premium rate was 88.35% in March 9th.

"Global outbreaks, masks, especially the concept of melted spray cloth, A shares involve about 10 listed companies, such as" Dao en "shares of the melt blown fabric business, technology upgrading, Xinlong holdings, TEDA shares and so on. However, only when the technology is issued, convertible bonds can be issued, and there will be a rise or fall in the stock market. Some of the funds will flow into convertible bonds. An analysis of a private person.

However, the continuous rise of the convertible bonds has triggered a mandatory redemption clause.

In the evening of March 9th, it was announced that the company passed the "motion for redemption" in advance, and agreed that the company would exercise the right of redemption in advance of "refinancing" and redeem the "redemption register" registered on the register.

According to the agreement, during the period of convertible bond conversion, if the closing price of at least fifteen trading days of a company's stock in thirty consecutive trading days is not less than 130% of the current conversion price (including 130%), the company shall have the right to redeem all or part of the non convertible equity convertible bonds according to the value of the convertible bond's accrued interest.

The price of mandatory redemption is not the market price, but the bond price plus a certain interest.

"The price of re convertible bonds is far higher than the price of mandatory redemption, and investors' rational choice is to sell or convert convertible bonds into stocks." A large brokerage investor said.

In March 10th, the sharp fall of the convertible bond was in favor of the value of the equity swap.

Convertible bond investment is a derivative of stock trading. Under normal circumstances, the trend of stocks and their convertible bonds will not deviate too much. But in extreme cases, especially when good news is stimulated, when the stock price reaches a limit, convertible bonds will become a new direction of capital because of the larger range of rise and fall. In March 5th, 6, 9, and three trading days, stock prices shrank, and speculative funds were not able to get chips. Therefore, they entered the stock market again, causing them to rise sharply. Zhang Zihua, chairman of cloud assets, pointed out.

"With China's victory in the battle against the new crown outbreak, the A share protection concept has been completely cooled. In March 10th, it rose to a 30% decline in the aggregate price of the convertible bonds. The direct suspension to 14:57 had almost no time to give the funds the chance to flee, so the 11 day early morning capital was pulled up and saved, and the increase in the afternoon opening again to 30% was suspended. Finally, in the auction stage, the fund was suspended. The market has fallen and there has been a sharp decrease in capital flight to an increase of 6.27%, and turnover has also gone up by 1 billion 400 million. He added.

Watch out for new fire.

In addition to the hot debt of hot stocks, the new turn has become a hot arbitrage opportunity for convertible bonds.

"Convertible bonds are new and rare arbitrage opportunities are available for securities accounts. Convertible bonds can not be used for new stocks, but no advance payment will be made at the time of purchase. In a stock investment group where journalists are located, there are brokerages who invest heavily in promoting convertible bonds.

Data show that the issue of convertible bonds in 2020 has been listed 16, from the first day of listing, the new debt did not break, the average increase of 20.1% on the first day of listing.

The new high yield of convertible bonds has also attracted more and more funds to participate in online purchase. In 2019, the average purchase amount of convertible bonds was 800 billion yuan, with an average winning rate of 0.04%. In 2020, the average amount of online subscription of new debt has reached 2 trillion and 400 billion yuan, with an average winning rate of 0.02%.

Yang Delong, chief economist of Qianhai open source fund, also mentioned that with the new regulation of refinancing, the expansion will increase rapidly. Convertible bonds will be issued or reduced, supply will shrink or new premium will be increased and the winning rate will be further reduced.

While convertible bonds are newly touted, the risk of convertible bond investment can not be ignored.

"There are great risks in the sale of convertible bonds in the two tier market. For example, there are no restrictions on the rise and fall. Some retail investors may not understand the rules of convertible bonds trading. They will rush into the situation, and the situation of rising and falling sharply will be easy to lose." The former said.

"The risk of convertible bonds which is far above the face value is very risky." He suggested.

"Convertible bond and stock trading system is an innovative attempt in China's financial market. It can also derive arbitrage, hedging and other investment strategies. In addition to price fluctuation risk, the main risk to be avoided is convertible bond's mandatory redemption risk." Zhang Zihua thinks.

In addition, "this year, the global economy is dragged down by the new coronavirus infection and pneumonia. The downside of the listed companies is a big probability event. Considering that the conversion period is usually about 6-12 months from the date of issue, the convertible bonds issued in the near future will face greater uncertainty." Shen Wan Hongyuan analyst Meng Xiangjuan pointed out. (Editor: Wu Yan Ling)

?