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Weekly Convertible Bonds: Several Ideas of Alternative Shares

20 April 2018 10:48
Author: Dong De Zhi Kecong Wei Jin Jiaqi
source: Guosen Securities
edit:Oriental Wealth Network

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Summary
From the perspective of the bonds, the Suns of Computers, Baoan Machinery Co., Ltd., and Sanyi Light Industry Co., Ltd. topped the rise. In addition, Yongdong and CNPC, which are subject to the periodical price increase, were also higher, while Tiehan, Wanxin and Zhongxing were dragged down by the underlying stocks. obvious.

  Market backGu:Market trimming dominated, valuations were flat last week

  Market trimming dominated valuations last week:Last week, the stock market was dominated by trimming.Shanghai indexChong Gao but limited strength. Specifically, the Shanghai Composite Index rose slightly by 0.89% throughout the week.Shanghai 50Weekly up 0.89%GEMWeeks fell 0.67%. Plates, steel,bank, led by the computer sector, and agriculture, forestry, animal husbandry, fishing,food and drink, Appliances plate fell more. Convertible bonds rose following the equity market. The convertible bond index we calculated rose slightly by 0.39% last week. The parity index rose by 0.91%. The average conversion premium rate was still around 25.9%. The valuation remained unchanged last week, of which parity was more than 90 yuan. The average premium rate of convertible bonds rose by 0.05 percentage points to 8.85%. From the perspective of the bonds, the Suns of Computers, Baoan Machinery Co., Ltd., and Sanyi Light Industry Co., Ltd. topped the rise. In addition, Yongdong and CNPC, which are subject to the periodical price increase, were also higher, while Tiehan, Wanxin and Zhongxing were dragged down by the underlying stocks. obvious.

  List of valuations

  Convertible bondPolicyslightly:Some Ideas of Positive Shares Substitution

With the expansion of the convertible bond market, not only the traditionalBond FundManagers have refocused their attention, and equity fund managers have begun to pay attention to this market. As seen from the 2017 fundraising report of the public fund,Mixed fundswithEquity fundsThe market value of convertible bonds held by the Bank increased significantly, from 5.234 billion and 104 million in the third quarter of 2017 to 7.794 billion and 438 million in the fourth quarter, respectively, representing a month-on-month increase of 2.56 billion and 334 million, respectively. From the experience of personal road show, it is also felt that equity fund managers pay special attention to the price/performance advantage of convertible bonds relative to stocks. This article briefly discusses several ways of thinking that convertible bonds have an alternative role to positive stocks.

  Idea one: macro hedge.At present, the market's judgment on the macroeconomic situation in 2018 is quite different. We are inclined to the idea that the economic momentum is slowing down, based on several reasons: (1) The cycle of King pointed out thatPPIIt is an important indicator of economic performance. It has turned down from October 2017. (2) From the financial cycle, the social and financial indicators that characterize social financing needs have been downward since July 2017; (3) From the perspective of investment, infrastructure is subject to the fiscal deficit space and local government debt supervision.real estateHigh-frequency lead indicators for investment in commercial real estate sales and land purchases have also begun to decline. If investors recognize the logic of economic slowdown, but are concerned about the fact that the economic hard data have not yet been verified, you can choose to convert the macro-hedging of periodic targets in the bonds. We devaluate 17 Baowu EB and 17 Zhongyou EB. If the slowdown in economic momentum is confirmed, then 17 Baowu EB and 17 Zhongyou EB have a lower risk of falling than their underlying stocks. After all, the blue-chip and cyclical stocks in the first quarter have adjusted their prices near the face value; if the economy continues to exceed expectations, Hold 17 Baowu EB and 17 Zhongyou EB can avoid the risk of treading.

  Second thought: hotspots in the game.Some companies may be fundamentally normal, but have some hot spots and catalysts. At this time, the convertible bond's price/performance ratio relative to the positive stocks may be better, which is reflected in the lower risk of falling, and the hot spot can enjoy the benefit of following the positive shares. such as,Double loop driveAs the leading domestic gear segmentation market, the market value and business scale are not large, but because of the indirect ownership of shares in Ningde Times, the company has a unicorn concept. Ningbo Lianchuang holds 8.5% shares of CATL, Zhejiang University Lianchuang is Ningbo Lianchuang. As a general partner (funding 0.11%), the company is a limited partner of Zhejiang University Lianchuang (invested 20%), so the company actually holds 0.00017% of CATL shares, and its shareholding ratio is minimal. If the investor does not recognize the company's fundamentals but does not want to give up the unicorn concept, he can hold a double-ring convertible bond. In fact, on March 13th, the related stocks of the Ningde era changed, the double-ring transmission hit a daily limit, and the double-ring convertible bonds also soared 6.40%.

  Idea 3: Game reversal.For some companies with fundamental reversal expectations, the game price reversal often has certain risks, but due to the poor fundamentals of the previous period, the stock price is low, so that the corresponding convertible bond price is low, it has a larger game value. Because its margin of safety is larger than the positive equity. For example, blue label convertible bonds, the recent market put more attention on the game of its terms,Blue cursorTo change the “Procedure of changing the fund raising project as soon as possible within the next six months” in the previous rectification report to “The procedure of changing the fund raising project as soon as possible by December 31, 2018”, and the back-selling game will fail. Convertible bonds have come back after the announcement. However, we believe that the greater value of the target lies in the reversal of the fundamentals of the game's blue cursor, rather than a simple article game. From the capital market point of view, the original three natural person shareholders transferred 5.98% of the shares to Tibet Yaowang, and the transfer price per share was 7 yuan, which can be seen as a protective bottom; from the fundamental point of view, the blue cursor force accelerated to the data With the transformation of technology companies, the revenue of data technology business in 2017 has already accounted for 87% of the total revenue. After the new shareholders took over, they acted frequently. On the one hand, they invested 150 million yuan in self-owned capital to increase the capital of the largest shareholder affiliate, Shenzhen Zhongzhong. With the largest shareholder, the Kunlun Hall Big Data Research Institute was established. The company's previous goodwill impairment risk is gradually clearing, the overall advertising market is picking up, and the company's performance is likely to be positive. In the first quarter of 2018, profits increased by 61.00% to 85.77%. Although the call options contained in the Blue Standard Convertible Bonds are still in an out-of-pocket state, as a compensation that has a lower risk of decline than the underlying stocks, we believe that it still has a strong value of the game's fundamental rebound.

In short, there are many other ideas for using convertible bonds to replace the underlying stocks. The diversification of market investors is increasingly conducive to the healthy development of the convertible bond market.

  Primary market tracking

In the past week,Dingxin Communication,Tianma TechnologypublicConvertible bondsRecruitment prospectus, with a scale of 600 million and 305 million, respectively;Ruifeng Optoelectronics,Polycan Optoelectronics,Conlonda,Ice wheel environment,Overflow,Tianbang SharesPublicize the convertible bonds issuance plan, the scale of which is no more than 468 million, 285 million, 370 million, 600 million, 775 million, and 1.2 billion;Langmar InformationThe application for the withdrawal of the issuance of convertible bonds amounted to 527 million. Up to now, 156 convertible bonds have been issued, totaling 418.33 billion yuan, and 12 public exchange debts have been issued, totaling 39.85 billion yuan.

Table 3: Issuance Progress of Convertible Bonds/Exchange Bonds

Source: SFC website,Company Announcement,Guosen SecuritiesEconomic Research Institute

                (Editor: DF302)

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