Following the sharp decline of the previous day, the CSI convertible bond index continued to open low and go low in the morning of February 15, with a decline of more than 2% at one time, and continued to perform a rare sharp adjustment.
As of the morning closing, the CSI convertible bond index had stabilized slightly, down 1.06%; In the morning, the broad-based index of A-share market, wandequan a, rose by 0.87%, and convertible bonds continued to outperform positive stocks!
Why did it fall so sharply? How long will it last?
rare decline
In 2022, A-Shares stumbled and the debt was full. As the leader in the major categories of assets in 2021, the CSI convertible bond index has shown strong resilience after a high shock in more than six years.
However, on February 14, the convertible bond market suffered a rare decline in recent years. First, the convertible bond index significantly underperformed the stock index. According to institutional statistics, on the 14th, the China Securities convertible bond index fell 3.02%, the second largest one-day decline since 2017. On the same day, the Shanghai Composite Index fell 0.98%, the Shenzhen composite index fell 0.77%, and wandequan a fell 0.73%.
Second, there is little increase in bonds. On the 14th, among the 385 existing convertible bonds, 10 rose, 0 remained flat and 375 fell; In terms of positive stocks, 157 stocks rose, 12 stocks were flat and 216 stocks fell.
Individual bonds rarely rise, indicating that this is a comprehensive adjustment; The convertible bond index significantly underperformed the stock index, the individual bonds underperformed the positive stocks in a large area, and the high-priced bonds fell sharply, indicating that this is an active adjustment.
On the morning of the 15th, the convertible bond market continued to adjust and fell rapidly in the morning. The CSI convertible bond index once fell by 2.29%, and only a few bonds rose in the morning. Since then, the decline has slowed down, and the index recovered some lost land.
As of the morning closing of the 15th, the China Securities convertible bond index fell 1.06%. Among the 386 existing convertible bonds, 48 rose and 338 fell. The newly listed urban convertible bonds were outstanding, up 26.43% in the morning.
institutional warning of stampede risk
Insiders suggested that such a decline in the convertible bond market may mean that there has been a negative feedback phenomenon of panic stop loss, product redemption, passive selling and trading stampede in the market.
Liu Yu, chief analyst of Gf Securities Co.Ltd(000776) fixed income, said that from historical experience, such a large-scale oversold of convertible bonds often corresponds to the impact of large-scale redemption of institutions.
She explained that when the debt side institutions in the bond market have lower confidence in convertible bonds or corresponding positive stock market, they will tend to redeem products with high convertible bond positions. However, due to the limitation of individual bond liquidity and market scale in the convertible bond market, such redemption behavior is easy to lead to transaction stampede, resulting in the redemption of more products, as well as the triggering of stop loss line by annuity or other absolute income products, resulting in a series of negative feedback, and finally resulting in a significant compression of valuation in the whole market dimension.
Everbright Securities Company Limited(601788) Zhang Xu’s research team also said that the adjustment range of the convertible bond market exceeded that of the A-share market, or a large number of convertible bonds were sold due to the redemption of some products.
However, Qin Han, chief analyst of Guotai Junan Securities Co.Ltd(601211) securities fixed income, believes that at present, the turnover of the convertible bond market has not increased significantly, indicating that there has been no obvious stampede.
multiple incentives to kill
If negative feedback accelerates the market decline, where is the source of this decline?
It is worth mentioning that in 2021, the convertible bond market has unlimited scenery. The CSI convertible bond index rose by 18.48% throughout the year, more than twice the annual increase of Wande a (9.17%). In 2022, when the stock market concentrated in January, the convertible bond index was at a high level, showing great toughness.
However, from over rising to anti falling, the price is the expansion of convertible bond valuation.
“Since 2021, the convertible bond index and the conversion premium rate have continuously reached new highs. How to digest the high conversion premium rate has become the most worried problem for convertible bond investors.” Qin Han said.
Qin Han pointed out that there are only three situations of valuation compression: first, the small decline of positive shares and the sharp decline of convertible bonds – active compression; Second, positive stocks rose and convertible bonds fell – active compression; Third, positive stocks rose sharply and convertible bonds rose slightly – passive compression.
In terms of the trend on the morning of the 14th and 15th, corresponding to the first two situations respectively, it is the most intense way to actively kill the valuation, which may indicate that the problem of high valuation is an important factor.
Recently, the trend of A-Shares is weak. At the same time, the rising market of bonds is blocked. Convertible bonds have become enemies from both sides.
Some market participants mentioned that when investors are worried about the overvalued value of convertible bonds, the recent market sentiment is weak, and the negative information is easy to be over amplified, causing market panic. In addition, strong redemption may also play a role in accelerating the decline.
It is worth mentioning that on February 14, the existing convertible bond of China stock market news – dongcaizhuan 3 fell 13.46%, which had a great impact on the convertible bond index and other individual bonds. The imminent forced redemption is regarded as one of the reasons for the sharp decline of Dongcai Zhuan 3.
“Dongcai Zhuan 3, a weighted convertible bond with a remaining scale of 12 billion yuan, fell sharply, which impacted the already fragile convertible bond market with negative emotions and killed the valuation as a whole.” Qin Han said.
the trend of A-Shares is the key
For the future, Zhang Xu believes that in the short term, the adjustment is still continuing. It is suggested that investors control their positions, reduce pullback and wait for the opportunity. In the future, we can pay attention to the following directions: steady growth direction; There are many adjustments in growth stocks in the early stage, and the valuation of convertible bonds in some high boom sectors is returning to a reasonable valuation; Convertible bonds of companies whose performance exceeds expectations and difficulties reverse.
Qin Han believes that since the second half of 2021, the valuation of convertible bonds has been greatly killed occasionally, but the sustainability is not strong. The short-term sharp decline does not mean that the convertible bond market will turn downward, but it should arouse vigilance.
“Avoiding convertible bonds with high price and conversion premium rate and ‘picking up bargains’ when the valuation is compressed and the price performance ratio appears may be a self insurance method in the case of overall overvaluation of the convertible bond market.” Qin Han said.
Liu Yu said that at present, all the forces supporting the high valuation of convertible bonds have changed marginally. After the superposition of valuation compression, the market premium rate is still at a historical high, and there is no basis for blindly judging that the valuation impact is “in place in one step”.
She believes that the subsequent market evolution requires further observation of the changes in the strength of positive stock support. If the equity market recovers rapidly in the short term, the compression cycle is expected to end quickly; If the positive stock support continues to weaken, the negative impact may continue further. Under such circumstances, strong debt protection and high dividend varieties are the focus of attention in the short term.
