Strong Supervision Sword Out Of Scabbard Convertible Bond Manic Differentiation

"The last madness, there is no sign of stopping."

On October 26, for the early trading of convertible bonds, some domestic private fund managers commented to the reporter of the 21st century economic report.

Although the CSRC drafted the "management measures for convertible corporate bonds" (hereinafter referred to as the "management measures") on the evening of October 23, and solicited public opinions from the public, Jianfeng pointed out that the speculation of convertible bonds was disorderly, and the Shanghai and Shenzhen exchanges also successively issued papers to continuously focus on monitoring the convertible bonds with abnormal rise and fall in the market, and took timely regulatory measures Ten convertible bonds rose to 20% again and were temporarily suspended, with more than half of them facing a second temporary suspension.

Since then, some convertible bonds continued to rise, and Tongguang convertible bonds rose by nearly 120%. The highest increase of Bora convertible bonds reached more than 80%.

"The real value of the convertible bonds with high premium rate and seriously negative yield to maturity is only about 20% - 30% of the current price. It is not surprising that the price of convertible bonds will be cut back after the speculative atmosphere has subsided or forced redemption occurs. Ordinary investors should stay away from these varieties. " Private paipaipai net future star fund manager Xia Fengjing said.

Sharp differentiation of convertible bonds under regulatory pressure

The frequent changes of convertible bonds have become the focus of recent regulatory and market attention.

According to wind data, the total turnover of convertible bonds last week was nearly 500 billion yuan. On October 22 and 23 alone, 9 and 12 convertible bonds had a turnover rate of more than 1000%, 44 and 61 convertible bonds had a turnover rate of more than 100%. The total turnover of the market reached 118.7 billion yuan and 192.3 billion yuan respectively, far exceeding the average daily turnover of 34.6 billion yuan before October 22, 2020.

On October 22 and 23, two convertible bonds each had an amplitude of more than 100%, and 28 and 48 bonds had an amplitude of more than 20%.

In the face of this extreme phenomenon, the regulatory authorities have already taken action. On the evening of October 23, China Securities Regulatory Commission drafted the measures for the management of convertible corporate bonds, and solicited public opinions from the public, seeking to optimize the relevant rules and regulations, and curb the explosion of convertible bonds from the source. On the same day, Shanghai and Shenzhen exchanges also joined hands. We will continue to focus on monitoring the convertible bonds with abnormal rise and fall in the market, and take timely regulatory measures.

The formal notice on the implementation of the "one month convertible bonds" issued by the Shanghai Stock Exchange and Shenzhen stock exchange is more suitable for the investors to participate in the transaction.

Shanghai and Shenzhen stock exchanges said that the above-mentioned notice mainly supervises the trading authority of convertible bonds. The investment in convertible bonds still needs to pay attention to the fundamentals of listed companies, the positive stock trend and the intrinsic value of convertible bonds. For the convertible bonds with high premium rate, high turnover rate and high closing price, the risk should be avoided in time.

Even under the intensive "cooling" of the regulatory layer, the convertible bond market was still hot on October 26.

By the end of the day, 12 convertible bonds had increased by more than 20%, of which Tongguang convertible bonds and Kyushu convertible bonds increased by 84.24% and 72.22% respectively. Another 11 convertible bonds also increased by more than 10%. In terms of transaction volume, the turnover of Tongguang convertible bond and Baolai convertible bond also reached 18.6 billion and 13.0 billion respectively.

However, different from last week's market, the price of some convertible bonds showed a significant differentiation on the 26th. On the same day, smart convertible bonds staged a "sky floor", falling from the highest 278 yuan to 184 yuan, closing down 14.42%. In addition, Taiyang convertible bonds, Yinhe convertible bonds, Wanli convertible bonds and Blue Shield convertible bonds, which were the hottest in the market last week, all fell more than 5%.

"Substantial differentiation is the inevitable choice after the convertible bond speculation reaches a certain level," Xia said. There are obvious signs of fund speculation in this round of convertible bonds. Funds switch back and forth between different convertible bonds, chasing up and down. Speculation is similar to beating drums and spreading flowers, making full use of the T + 0 rule.

"In the current market, the correlation between the rise and fall of convertible bonds and positive stocks is not high, and the high premium rate of convertible bonds indicates that the market is not ideal. Many investors hold the idea of making a last-minute bid before the issuance of the measures for the administration of convertible bonds. They are very easy to be harvested by the super short-term main funds familiar with convertible bonds. " The private fund manager said.

According to Yang yewei, a fixed income analyst at Guosheng securities, the recent performance of convertible bonds is similar to the booming market in March this year. However, the difference is that in this round of speculation, the number of abnormal single bond par value exceeding 130 yuan is less, "this is because high parity convertible bonds are easy to trigger redemption clauses, thus speeding up the delisting of convertible bonds, which is obviously what speculators do not want to see.".

System construction is expected to continue

"Normally speaking, the regulatory revision of the new rules to curb abnormal trading of convertible bonds will at least have an emotional cooling effect before the issuance of the new rules. This time, we feel that the market is indifferent. It is hoped that the administrative measures can be implemented as soon as possible. " Private equity managers said.

On October 23, the "management measures" drafted by China Securities Regulatory Commission (CSRC) further curbed excessive speculation on convertible bonds from the aspects of trading rules and investor suitability assessment. It is proposed to establish a cross variety monitoring mechanism between convertible bonds and principal stocks and formulate abnormal volatility indicators.

Sun Binbin, chief analyst of fixed income of Tianfeng securities, said that the current trading rules of convertible bonds mainly refer to the trading rules of ordinary bonds of the two major exchanges, adding some factors of small circulation of convertible bonds. Under the current trading rules, convertible bonds can easily enlarge the price fluctuation of positive shares. In terms of subsequent convertible bond trading rules, it may be modified in combination with the trading characteristics of regular shares, such as introducing the same price limit system as regular shares, and "t + 0" and so on.

In terms of terms of redemption and resale, the administrative measures put forward that "the redemption and resale terms specified in the prospectus of some convertible bonds are obviously not equivalent", and the trigger conditions, exercise period, exercise times and interest calculation methods should be equal and consistent. Sun Bin said that before the listing of securities companies, the relevant provisions were formulated. After the introduction of the follow-up rules, it is expected to promote the consistency of the terms in the convertible bond market. On the one hand, it will promote the consistency of the rights and obligations of issuers, on the other hand, it will reduce the valuation differences caused by different terms.

In addition, in the current rules, the disclosure requirements of Shanghai Stock Exchange and Shenzhen Stock Exchange are different after meeting the redemption conditions. On the one hand, it increases the risk of forced redemption faced by the transaction subject, and on the other hand, after the company discloses "no redemption", the transaction subject also faces the risk of "face change" of the issuing entity. According to the statistics of Tianfeng securities, since 2020, a total of 5 companies have changed their attitude towards redemption, and the interval from disclosing non redemption to choosing redemption varies from 20 to 40 days. The follow-up exchanges are expected to introduce clearer redemption disclosure rules, so as to reduce the risk of forced redemption of trading entities.

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