At The End Of The Year, Sentiment Was Low, New Bonds Broke Out In Large Areas, Institutions Sold Fiercely, And The Convertible Bond Market Encountered A Super Cold Wave

In 2020, the style of the play will change greatly.

Recently, the convertible bond market has been hit hard, and individual bonds have fallen more and risen less, and the differentiation has also been further intensified. At the same time, near the end of the year, convertible bond listing breaking tide is becoming more and more intense.

On December 28, three convertible bonds were listed at the same time, of which wanshunzhuan 2 and Beilu convertible bonds were both broken, and only CAITONG convertible bonds rose.

On December 29, the newly listed runjian convertible bonds also broke, falling 1.95% on the same day.

The successive decline of convertible bonds has made investors who used to be enthusiastic about the new market encounter a "slap on the head". In fact, investors are no longer active in recent years.

"The recent market weakness is mainly due to the impact of negative credit events. Due to the impact of credit risk, the convertible bond market has also begun to consider the pricing of some risk bonds. In addition, some convertible bonds with weak positive stocks have also affected the performance of convertible bonds after listing." The director of fixed income of a public fund in Beijing told the reporter of 21st century economic report.

Convertible bonds encounter cold wave

In the past month, more than one convertible bond was broken after listing, which has brought a great impact to the market sentiment.

On December 22, Haibo convertible bonds rose 20% and triggered a "circuit breaker", but after the resumption of trading, they plummeted and broke; on December 23, Yongan convertible bonds broke; on December 24, Xiangxin convertible bonds were listed. Also this week's Wanshun 2, Beilu convertible bonds, and runjian convertible bonds all broke after listing.

It is not only the continuous breaking of new bonds after listing, but also the overall trend of the convertible bond market.

"From the positive stock performance, the recent market differentiation is still very obvious. Under the background of positive stock differentiation and credit risk impact, the performance of convertible bonds is more significant Citic securities analysis pointed out.

From the perspective of institutional allocation, the impact of this market change may be more profound.

"The allocation demand of the convertible bond market is still mainly from institutions, and mainly fixed income funds. Recent market changes have led to a sharp contraction in the demand for low-grade and small-scale convertible bonds." According to an interview, a securities firm is a public fund convertible fund manager.

"The default of the related party bonds of individual convertible bond issuers has ignited the concern about the credit risk of convertible bonds. It is not ruled out that some institutions are forbidden to invest in low rating convertible bonds. Moreover, the investment scope of the new bond base generally requires only to invest in convertible bonds with a rating above AA, which in the medium and long term reduces the amount of funds that can be configured for low rating convertible bonds." According to the above-mentioned institutions.

"In the near future, the trend of convertible bonds is significantly weaker than that of positive stocks. Even on the trading day when the positive stocks rebounded substantially, the convertible bonds only showed a slight rebound. Some convertible bonds with weak positive stocks showed significant compression of option valuation level. The convertible bond market has been impacted by credit events. Some companies issuing convertible bonds have had credit default events. The average qualification of superimposed convertible bond shares is weak. Investors' worries about the credit level of convertible bonds have gradually deepened. From the open data, some institutional investors have sold convertible bonds substantially. " Peng Yang fund fixed income director Wang Hua told the 21st century economic reporter.

"From the perspective of positive stocks, the performance of large and small market value stocks is becoming more and more differentiated. In the process of deepening the institutionalization of the stock market, the trading volume of small market value companies has decreased, and the valuation and volatility have declined systematically, which is not conducive to the long-term performance of related convertible bonds," said a person from a Beijing fund company It has slightly improved, but it is still a long way from the historical low level. "

According to the feedback given by many organizations to 21st century economic reporters, the current mood of convertible bonds is relatively cautious. "We can pay attention to the wrong killing opportunities of some coupons, but we still need to be careful to choose the underlying targets." According to the above-mentioned public funds.

It is worth noting that the previous overvalued convertible bond market is also one of the important reasons for the market adjustment.

GF Securities pointed out that since June 2019, the valuation level of the convertible bond market has continued to rise. In this process, low price varieties with relatively high qualification are gradually "eliminated" in the natural screening process of the market. However, the valuation pull-up of configuration type varieties reflects not the increase of configuration value, but the passive promotion of valuation driven by demand. Therefore, under the impact of recent credit risk events, this part of the valuation of lack of support has been significantly compressed.

Credit risk shocks the market

In fact, when it comes to the trend of the convertible bond market in the near future, the impact of credit risk is an unavoidable keyword.

On December 14, the "20 Hongda scp001" issued by Hongda Xingye group failed to pay the interest on time, and the market was worried about its default, which led to a sharp decline in Hongda convertible bonds and its shares.

Such events also prompted the market to summarize and reflect on the strategy of convertible bonds.

GF Securities believes that under the impact of the negative credit events such as Guanghui convertible bonds and Hongda convertible bonds, the convertible bond market has for the first time begun to seriously re price the potential credit risk of the existing bonds. Due to the influence of credit risk, the low price allocation strategy related varieties attached to low withdrawal protection for a long time have lost the consensus expectation of "almost unbreakable" of debt bottom protection, and the strategic value has been seriously challenged.

"With the successive introduction of macro policies, the market has a big divergence on whether the future equity market can effectively digest the extremely high implicit option valuation level of convertible bonds. Some institutional investors have reduced the expected return of the equity market. At this time, the increase of positive stocks will be difficult to digest the higher premium rate, and the convertible bonds have no allocation value relative to the principal stocks." Wang Hua said.

Wang Hua believes that "a few weeks ago, the valuation level of convertible bonds was at a very high position, which provided a large space for downward compression of the premium rate. Although convertible bonds are in the peak supply season, and the speed of new bonds listing is accelerating, this is not a key factor affecting the valuation level, but the continuous breaking of convertible bonds will also have a certain impact on investors' sentiment. "

From the perspective of follow-up strategies, the pro cyclical sector is the "consensus" of many institutions.

"Affected by the impact of credit risk and the breakup of listed convertible bonds, the recent convertible bond market sentiment is relatively negative, and there is high valuation and supply pressure. It is suggested to pay attention to the pro cyclical sector and choose double low convertible bonds with performance growth space. However, the operation space is limited, mainly trading opportunities and structural opportunities. In addition, we should guard against the risk of breaking new bonds and guard against the short-term risks brought by repeated outbreaks 。” Founder Securities that.

CITIC Securities also said that with the gradual dispersal of short-term disturbance, the market has returned to the main trend in the past two weeks, which has opened a new round of rise Pro cyclically. In the short term, this direction is the most deterministic and worth participating in the current market. When it comes to the convertible bond market, it can be regarded as the deduction that the strong are always strong. Most of the counter cyclical main lines are high price targets. The performance of this kind of individual bonds in the past two weeks is obvious to all, while the traditional low price strategy performs poorly under the impact of credit risk.

"For the convertible bonds that hit the bottom first, if they have excellent qualifications and good flexibility, they should not be too pessimistic. Instead, they should buy at low prices and firmly hold them when they have liquidity, and will obtain higher yields in the future. For convertible bonds that have not yet fallen, they should not be too optimistic. If the valuation level of options is very high, it may make up for the losses. For some convertible bonds that have risen sharply in the short term, it is not recommended to pursue them High. The combination of qualification, protection and flexibility will be the main strategy in the future Wang Hua pointed out.

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