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    Converting debt strategy in the second quarter of 2019: peak circuit transfer

    2019-03-14 09:49:07

    Jiang Chao's Macro Bond Research Jiang Chao Jiang Yanshan Li Bo

     The peak and the loop, the configuration is the first - the second quarter of 2019, the conversion strategy (Haitong fixed collection Jiang Chao, Jiang Yanshan, Li Bo)

    Peak loop, configuration first

    ——2019Second quarter of the year

    (Haitong's solid collection of Jiang Chao, Jiang Yanshan, Li Bo)

    Summary

    Market review: convertible bonds rose, valuation compression

    19The annual convertible bond market performed brilliantly.As of March 13, the CSI Convertible Bond Index rose by 16.7% in 19 years, and the weekly “8 consecutive yang” appeared. The vouchers have basically risen in an all-round way, and the overall communications, computer, media, and electronics sectors have performed well.In terms of liquidity,In the first two months of the year, the average daily turnover of the convertible bond market rebounded to about 4.02 billion, which was the same as the same period in 18 years. Among them, the average daily trading volume in February was 6.15 billion, and the average daily trading volume in March was more than 10 billion.In terms of valuation,At present, the conversion premium rate of the convertible bond market is 24.9%, which is down 13.5 percentage points during the year; it is already below the historical average (31.2%), returning to the level of February 18th.

    Supply: The issue is greatly accelerated.In the 19th year of the opening of the market, the market sentiment warmed up, and the issuance of convertible bonds increased significantly In the past 19 years, the number of convertible bonds issued has reached 23, and the amount has reached more than 100 billion yuan (including 26 billion yuan of convertible bonds, 40 billion yuan of CITIC convertible bonds, and 20 billion yuan of Soviet silver convertible bonds). The supply pressure cannot be underestimated.

    Primary market: subscription recovery, supply acceleration

    The first-level purchase is getting warmer.In the past 19 years, the conversion bond market has performed well, and the first-level subscription has also significantly warmed up. Since 19 years, the number of convertible bonds has been issued at one level. The average number of online purchases has risen to about 210,000, and the average number of online purchases has exceeded 2,000. The success rate has dropped significantly. In terms of listing, the price and premium rate of listed convertible bonds have increased in the past 19 years, and the rate of breakage has also dropped significantly.

    The new income is higher.Although the new vouchers have been on the first day of trading in the past 18 years, the average listing price of new vouchers is still higher than the face value. According to our calculation, the first-level subscription of convertible bonds is higher than the purchase of secondary listings. . However, subject to the success rate, the level is often difficult to get. Therefore, for large-scale convertible bonds, the first-level new-type should actively participate; but for smaller-scale convertible bonds, the window of the first day of listing is more worthy of attention.

    Terms and conditions game: reduction in repairs, increase in redemption

    19Revised or reduced in the year.In the 18-year period, the proportion of convertible bonds transferred out has dropped sharply. The proportion of accepting the resale has increased. At the same time, the number of cases of active repairs has increased significantly. This is related to the overall poor market and the sharp decline in convertible bonds. In the past 19 years, the number of convertible bonds has risen sharply, and the number of convertible bonds triggered by the repairs has decreased significantly. In 19 years, the chances of playing the game have been relatively limited.

    Redemption increased and resale turned on.At present, the Sany Convertible Bonds have triggered redemption and announced the redemption reminder announcement. In addition, the prices of convertible bonds such as Dongcai, Changshu and Shenglu all exceeded the redemption conditions and were close to triggering redemption. In terms of resale, the electric convertible bonds entered the resale period; the airline credit-to-debt, 16 Yiling EB, etc. also approached the resale period.

    Convertible debt strategy: peak loop, configuration first

    The stock market is bright and optimistic for a long time.First of all, although the stock market valuation has improved in the past 19 years, it is still in a historically low level and has room for improvement. Secondly, in the second half of the 18th year, the macro policy turned to stable leverage, and in January 19, the social welfare rebounded in advance, indicating that the economy has not bottomed out; the stock market is already in the bottom. Finally, the current stock market risk premium is at a 14-year high, and future valuations are expected to usher in a long-term recovery.

    Convertible bonds have long-term configuration value.As a risky asset of equity, we believe that convertible bonds have long-term configuration value. In terms of industry, the 19-year liquidity easing is good for the valuation of growth stocks; the economic downturn is good for the weak cycle industry, focusing on the growth + weak cycle opportunities. In terms of strategy, the market style will be more balanced in 19 years, and the hybrid strategy or best. The transfer of bonds must take into account the valuation of the underlying stock and the premium rate and price of the convertible bonds.

    Look for undervalued plates.The short-term market has risen rapidly, and the difficulty of converting bonds has increased. Some of the coupons with larger gains are currently at a high price, and there is a certain risk of callback; they can focus on the industry sector where the recent gains are not large, and the convertible bond prices and underlying stocks are undervalued. Such as consumer electronics (grand, crystal), environmentally friendly buildings (Lingnan, Gaoneng), automobiles (Xinquan, Del), photovoltaic (Linyang), consumption (Haicang), media (Ji Shi) and so on. Some strong coupons (Longji, Shuguang, Jiadu, Guojun, Changzheng) can wait for the layout opportunity after the callback.

    1.The market review, the convertible bond rose,Valuation compression

    1.1 19The annual convertible bond market is eye-catching

    In the 18-year downturn in the equity market, the overall performance of convertible bonds was poor. However, since the beginning of 19 years, market risk appetite has rebounded markedly, and both the equity and convertible bond markets have performed brilliantly. As of March 13, the CSI Convertible Bond Index rose by 16.7% in 19 years; our calculated convertible bond parity index rose by 20.8%. In the same period, the Shanghai Composite Index rose 22.7%, the Shanghai and Shenzhen 300 Index rose 24.7%, the GEM index rose 41.8%, and the Shanghai Stock Exchange 50 rose 18.5%.

     The peak and the loop, the configuration is the first - the second quarter of 2019, the conversion strategy (Haitong fixed collection Jiang Chao, Jiang Yanshan, Li Bo)

    19Since the beginning of the year, the market for convertible bonds has been divided into three stages.From January 2 to 18, the stock market and the convertible bond market picked up, and the valuation was slightly compressed. At the beginning of the year, the market was “swinging in the spring”, the mood warmed up, and the stock market and convertible bonds all rose moderately. The best performance at this stage is the 5G concept vouchers such as SDG and Dingxin. From January 21st to January 31st, the stock market fluctuated, the convertible bonds rose, and the valuation rose. With the performance of the small and medium-sized 2018 annual report, the stock market has entered a consolidation stage, but the stock market has been in a high level of sentiment. The better performance at this stage is the bank convertible bonds, Haier and other large varieties. Since February, the stock market has risen sharply, and the convertible bonds have risen and the valuation has been compressed. After the year, the market sentiment gradually rose, the stock market soared, and the convertible bonds returned to the positive stocks, and the valuation was greatly reduced. At this stage, the number of coupons rose, and the best performance was the small-cap growth coupons such as SDG and Chau Ming.

    The vouchers have basically risen in an all-round way and their growth performance is better.On the whole, the bonds that have been converted into bonds have basically risen in the past 19 years. The top five gainers were Special Convertible Bonds (79.35%), Yokogawa Convertible Bonds (70.65%), Leo Convertible Bonds (63.25%), Dongcai Convertible Bonds (52.41%) and Blue Shield Convertible Bonds (51.45%). Overall, communications, computers, media, electronics and other sectors performed better.

     The peak and the loop, the configuration is the first - the second quarter of 2019, the conversion strategy (Haitong fixed collection Jiang Chao, Jiang Yanshan, Li Bo)

    1.2 Valuation is substantialcompression

    In terms of valuation, with the surge in the stock market in 19 years, the conversion premium rate has been greatly reduced. As of March 8, the conversion premium rate of the convertible bond market was 24.9%, down 13.5 percentage points during the year; pure debt YTM was 0.22%, down 2.2 percentage points during the year. The conversion premium rate has been below the historical average (31.2%), returning to the level of February 18th.

    Among them, the conversion premium rates of convertible bonds of 70 yuan or less, 70-100 yuan and 100 yuan or more were 84.6%, 24.8% and 8.67%, respectively, and have changed by 6.7, 3.34 and 3.48 percentage points respectively this year. At present, the conversion premium rate of medium-to-high-priced convertible bonds is still below the historical average, but it is already higher than the average of the past year. Although the recent valuation is generally compressed, the valuation of stock vouchers is not low.

     The peak and the loop, the configuration is the first - the second quarter of 2019, the conversion strategy (Haitong fixed collection Jiang Chao, Jiang Yanshan, Li Bo)

    1.3 Liquidity rebounded sharply

    In the past 18 years, the market for convertible bonds has been sluggish. The volume of transactions has gradually declined after a brief rise in January. The average daily turnover of the convertible bond market was around 2.23 billion, of which the average daily turnover of 18Q4 convertible bonds has shrunk to about 1.6 billion. In the past 19 years, the number of convertible bonds has risen sharply, and the transaction volume has rebounded rapidly. The average daily turnover of the convertible bond market in the first two months of 19 years ago has rebounded to about 4.02 billion, which is the same as that in the same period of 18 years. Among them, the average daily trading volume in February was 6.15 billion, and the average daily trading volume in March was more than 10 billion.

    Special hair, Pingyin and Dongcai have good liquidity.In terms of the liquidity of coupons, the average daily turnover of special convertible bonds reached 370 million in 19 years, ranking first; followed by Pingyin (330 million), Dongcai (310 million), and Everbright (210 million). According to our statistics, there are 9 convertible bonds with an average daily trading volume of more than 100 million yuan, 14 with between 0.5 and 100 million yuan, 51 convertible bonds between 0.1 and 0.5 billion yuan, and the remaining 63 The average daily trading volume of bonds is below 10 million yuan.

    1.4 Requirements:The proportion of fund transfer debt holdings is stable

    Since 2018, the market value of public fund transfer debt holdings has basically stabilized at around 400-460 billion, and the overall position is at a high level in the past three years. Among them, bond funds hold positions of around 29 billion yuan, followed by hybrid funds, and 18Q4 positions rose to 16 billion yuan. about.

    The proportion of fund-to-debt holdings in the market value of convertible bonds was basically stable at around 18%, with a slight decline to 17.9% in the fourth quarter. The proportion of fund transfer debt holdings to the fund's net value rose slightly to 0.35% in 18Q4. Overall, the current demand for public funds to maintain the position of convertible bonds has remained basically stable.

     The peak and the loop, the configuration is the first - the second quarter of 2019, the conversion strategy (Haitong fixed collection Jiang Chao, Jiang Yanshan, Li Bo)

    The position of the convertible bond institution was slightly adjusted.Judging from the data on the positions of the Shanghai Stock Exchange, as of February 19, the Shanghai Stock Exchange convertible bonds had a market value of 115.3 billion yuan, an increase of 3.2 billion yuan in 19 years. Among them, general corporate holdings accounted for 35.8%, funds accounted for 20.1%, and insurance annuities accounted for 14.9%. In addition, brokerages accounted for 7.5%, social security accounted for 6.1%, brokerages accounted for 5.6%, and personal coupons accounted for 4.7%.

    From the perspective of changes in the ratio, the ratio of fund holding convertible bonds is stable at around 20%, insurance is stable at around 15%, and the proportion of general corporate holdings has dropped to 36%. In addition, the proportion of securities companies holding convertible bonds has increased significantly in 19 years.

     The peak and the loop, the configuration is the first - the second quarter of 2019, the conversion strategy (Haitong fixed collection Jiang Chao, Jiang Yanshan, Li Bo)

    1.5 supply:Significant speed increase

    The first quarter is generally the off-season of convertible bond issuance. In the first two months of January and January, there were 7 convertible bonds issued, amounting to 13.3 billion yuan. However, in the 19th year of the year, the market sentiment warmed up, and the issuance of convertible bonds increased sharply. In the past 19 years, the number of convertible bonds issued has reached 23, and the amount exceeded 100 billion yuan (including 26 billion yuan for Pingyin convertible bonds, 40 billion for CITIC convertible bonds, and 20 billion for Soviet silver convertible bonds). The supply pressure should not be underestimated.

    In terms of the plan, 28 new convertible bonds have been issued in the past 19 years, with a total amount of about 18.7 billion yuan; the number and scale are lower than the same period of 18 years. As of March 1, 19, a total of 522.7 billion yuan of new bonds were issued, including 195 convertible bonds, with a total amount of 444.6 billion yuan.

     The peak and the loop, the configuration is the first - the second quarter of 2019, the conversion strategy (Haitong fixed collection Jiang Chao, Jiang Yanshan, Li Bo)

    Statistics on stocks and convertible bonds:At present, there are 135 convertible bonds that have been listed, amounting to about 284 billion yuan. From the perspective of the industry, the current stock convertible bonds cover 28 of the 29 CITIC-level industries, which is basically equal to the industry-wide coverage. In terms of quantity, chemical industry (12), automobile (11), media (10), and electronics (10) have more convertible bonds; from the perspective of scale, bank convertible bonds (75.6 billion yuan) ), petroleum and petrochemical (36.5 billion yuan) and other large scale.

    2Primary market: purchases pick up, supply accelerates 2.1The number of purchasers has rebounded significantly, and the success rate has dropped significantly.

    In the past 18 years, the performance of the convertible bond market has been poor, and the heat of the primary market has cooled sharply. The number of online subscriptions for convertible bonds has dropped significantly. According to our statistics, the number of convertible bonds issued in the first half of the year was about 600,000. In the second half of the year, the average number of online subscriptions for convertible bonds was only around 90,000. In the past 19 years, the average number of online purchases has risen to around 210,000. Under the net, in the past 19 years, the average number of online purchases has exceeded 2,000. Among them, the number of convertible bonds was close to 1,500, Changqing turned 2 to nearly 3,500, and Zhongtian Convertible Bonds reached 5,450, setting a record high.

    Judging from the winning rate, the average winning rate of new bonds in the first half of the year was around 0.14% in the first half of the year; it rose sharply to 0.42% in the second half of the year. In the past 19 years, the rate of new coupons has dropped to 0.15%, and the number of offline and online subscriptions has rebounded.

    Judging from the purchase of new vouchers, the second half of the year is the worst stage of market sentiment, and the success rate has risen sharply; there has been a large proportion of abandonment on the Internet. In the past 19 years, market sentiment has rebounded markedly, the success rate has dropped, and the phenomenon of abandonment has also been significantly weakened.

     The peak and the loop, the configuration is the first - the second quarter of 2019, the conversion strategy (Haitong fixed collection Jiang Chao, Jiang Yanshan, Li Bo)

    2.2The listing price is compared to the first day premium rate18 years of recovery

    In the past 18 years, the new bonds have been listed on the market. According to our statistics, the average price of the first day of listing in the first half of 18 years is about 105 yuan, and 11 of the 36 convertible bonds are broken. In the second half of the year, the listing turned. The average price of the first day of debt was only about 100.2 yuan, and 23 of the 41 convertible bonds were broken, with a break rate of 56%.

    In the past 19 years, there have been 11 convertible bonds listed, and the average price on the first day of listing has risen to 105.6 yuan; only 3 of them have broken face, and the rate of breakage has dropped significantly.

    The reason for the frequent breaks in the 18-year period was that the premium rate on the first day of listing was significantly lower.According to our statistics, the first-day premium rate of 36 listed convertible bonds in the first half of 18 years was about 8.6%. In the second half of the year, the average price of the first-day convertible bonds of 41 listed convertible bonds was only about 5.3%, of which 9 were listed. The first day is a negative premium. In the past 19 years, 11 convertible bonds have been on the first day of listing, the average premium rate has rebounded to 6.4%, of which only one has a negative premium.

     The peak and the loop, the configuration is the first - the second quarter of 2019, the conversion strategy (Haitong fixed collection Jiang Chao, Jiang Yanshan, Li Bo)

    2.3What is the new level of income?

    In the past, we have sorted out the changes in the primary market for convertible bonds in the past 18 years. Here we simulate three strategies: First, the first-time subscription of the new convertible bonds, and the first day of listing. Second, the new coupons are purchased at the first level, and the positions are not sold. Third, the new voucher will be bought on the first day of listing, and the position will not be sold. The effects of the three strategies are as follows:

    1) Strategy 1: In the first half of the year, the profit of Strategy 1 was around 4.32%, and the CSI Convertible Bond Index rose by -2.17% during the same period of the year; the profit of Strategy One in the second half of 18 years was around 1.53%, and the CSI Convertible Bond Index rose during the same period. At 1.03%, the increase of Strategy 1 in the past 19 years was 12.64%, and the increase in the CSI Convertible Bond Index was about 14%.

    2) Strategy 2: As of the first half of the year, the profit of Strategy 2 is around -0.03%; the profit of Strategy 2 in the second half of 18 years is -0.16%. In the past 19 years, the profit of Strategy 2 has risen to 14.06%.

    3) Strategy 3: As of the first half of the year, the profit of Strategy 3 is around -4.65%; the profit of Strategy 3 in the second half of 18 years is -1.15%. In the past 19 years, the profit of Strategy 3 has only been around 1.43%.

    From the income situation of Strategy One and the comparison of the benefits of Strategy 2 and Strategy 3, it can be found that the first-level subscription of convertible bonds is higher than the price-performance of the secondary listing. Although the new coupons have been on the first day of trading in the past 18 years, the average price of new coupons is still higher than the face value. The first-level subscription is a more cost-effective way to collect chips.

    However, the first-level subscription is bound by the success rate, and it is difficult to get the amount; especially for the smaller-scale convertible bonds, the new-level new income is not high. The first day of listing is the window with the largest turnover of convertible bonds, which is convenient for collecting chips. Therefore, the strategy of higher cost performance is to “buy new and small coupons to participate in the big coupons”: that is, for large-scale convertible bonds, the first-level subscription can get a certain amount, and the new one should actively participate; Small convertible bonds, the level of first-level subscription is limited, and the window on the first day of listing is more worthy of attention.

    3.articleGame: reduction in repairs, increase in redemption 3.1The proportion of convertible bonds transferred out of this year has dropped

    Among the 76 convertible bonds that were delisted after 2006, 66 only triggered the transfer of the shares after the forced redemption, and 1 of the expired shares (no redemption clause). The success rate of the conversion of shares was as high as 88%. Only about 12% are resold, expired, etc. However, the five convertible bonds that have been delisted in the past 18 years (Baoxin, Wanxin, Jiangnan, Qingkong EB, Tianji EB), only the first two are converted out, and the last three are sold back; 18 years Since then, the proportion of convertible bonds transferred to stocks has dropped sharply.

    From the perspective of the duration of maturity, the average duration of delisting convertible bonds is about 781 days, of which the average duration of strong redemption is only 666 days.

     The peak and the loop, the configuration is the first - the second quarter of 2019, the conversion strategy (Haitong fixed collection Jiang Chao, Jiang Yanshan, Li Bo)

    Why is the probability of successful conversion of the previous convertible bonds high? First, the market reasons. In 2007-08, 14-15 years, there were two big bull markets, which led to the conversion of large-volume convertible bonds. During the period of 09-10 years and 12-13 years, the stock market also has a structural market. As long as there is a wave of market transactions during the life of the convertible bonds, the probability of conversion will be greatly enhanced. The second is the reason for the coupon. Previously, the convertible bonds belonged to the niche market, and the number of coupons was small, making it difficult to issue. Most companies that choose to issue convertible bonds are holding the purpose of converting shares, so the power to promote the conversion of shares is strong. The typical "return-down clause" game success rate is significantly improved.

    At present, the issuance cycle of the convertible bond market has been shortened, the scale has been greatly expanded, and the purpose of the issuer has also become diversified. The interest game between investors and major shareholders has led to an increasingly complicated situation. The success rate of “return-down repair” in 18 years has been significantly reduced, and the exit route of the future convertible bond market will be more diversified, and the success rate of the share transfer will be further reduced.

    3.2Reduced repairs, redemption increased

    At present, there are 103 vouchers entering the conversion period, of which 17 Tongkun EB, Dingxin, Shenglu, Wanshun and other convertible bonds have been converted into more than 50%, and the international trade, Kangtai, Xiaokang, Radio and Television, Liou and other convertible bonds The conversion progress is over 40%.

    In terms of redemption, the current Sany convertible bond has triggered redemption and announced the redemption reminder announcement.In addition, the prices of convertible bonds such as Dongcai, Changshu and Shenglu all exceeded the redemption conditions and were close to triggering redemption. In terms of resale, Gree convertible bonds were sold back more than 50%; electrical convertible bonds entered the resale period; Hangxin convertible bonds, 16 Yiling EBs, etc. approached the resale period. In terms of the final revision clause, there are currently 33 convertible bonds triggered to be repaired; with the recent increase in the convertible bond market, the number of convertible bonds triggered by the repairs has decreased significantly.

    18The number of active renovations increased.In the past 18 years, a total of 25 convertible bonds have been announced in 28 successive revisions, setting a historical record of convertible bonds. Among them, Jiangyin, Lansi and Lanbiao announced the revised plan twice. Judging from the success rate of the next revision, the current 28 shareholders' meeting reviewed and approved 26 revisions, with a success rate of 93%. However, there were still two failures to be repaired (Zhongxing, Lansi), and the situation that the repairs were not as expected (Haiyin, Crystal, etc.).

    What are the motivations for the repair?The motives for the repair are mainly as follows:First, the traditional sale and repair,That is, the convertible bonds entering the resale period are revised to avoid the pressure of selling back (such as Jiangnan convertible bonds); however, some of the convertible bonds may enter the resale period, and there may be actions to be repaired in advance (such as electric convertible bonds, etc.) ), as a whole, to repair the debt repayment pressure.

    Second, the more common phenomenon since this year is that the proportion of shareholder placement is higher, and the price of convertible bonds is lower than the face value;If the major shareholder has a large proportion of equity pledge and liquidity is tight, for the purpose of stop loss, there will be a strong downward revision. In addition, if the lead underwriter has a large proportion of positions, it may also promote the repair.

    Third, the bank's convertible bonds were repaired, basically for the purpose of replenishing capital.And according to our statistics, all bank convertible bonds that have reached the conditions for further repairs have been revised down this year. Due to the strong incentive to convert stocks, bank convertible bonds are generally low-risk convertible bonds; but considering the poor performance of bank stocks this year, a large number of positive stocks PB is less than 1 times, which also restricts the convertible bonds to a certain extent. The extent of the repair.

    The fourth is to reduce the pressure on financial costs and other reasons.

    The price of Huguang Convertible Bonds was lower than the net assets per share.Huguang Convertible Bonds passed the revised proposal on February 22, 19, and the conversion price was revised down from 10.16 yuan to 7.92 yuan.Hubei Radio and TelevisionThe net assets per share of 18Q3 is 0.45 yuan, and the net assets per share for 2017 is 9.21 yuan. The price of the converted debts fell below the net assets per share, which set a precedent for the conversion of convertible bonds.

    In fact, the conversion of the convertible bond price can not be lower than the net assets per share is not a clear rule, just to prevent dilution of the index per share, damage the existing shareholders' default rules. Some of the convertible bond issuance announcements have provisions for lowering the price of not less than the net assets per share, but some of the convertible bonds have no relevant requirements.

     The peak and the loop, the configuration is the first - the second quarter of 2019, the conversion strategy (Haitong fixed collection Jiang Chao, Jiang Yanshan, Li Bo)

    What are the implications of the game?1) The best time to repair the game is to ambush ahead of time. The next day, the plan will generally have a good increase. The judgment of the repair is mainly from the major shareholder and the lead underwriter, and whether there is resale and repayment. It is difficult to grasp the debt pressure and other aspects. In addition, since many of the convertible bonds that have been selected for repair are fundamentals and have poor liquidity, there are certain obstacles to the layout.

    2) If you wait until the next revision plan, you will face a strong uncertainty (whether the revision is passed or not), the actual income is not high; the next day, the next day, some investors will be highly thrown. Time.

    3) The 18-year convertible bond market was not good, and a large number of convertible bonds triggered the repair, and the cases were revised more frequently. However, the market has risen sharply in the past 19 years, and the number of targets that have been revised down has been significantly reduced. The chances of repairing this year's game may be limited.

    4.Convertible debt strategy: peak loop, configuration first 4.1The stock market is bright and optimistic for a long time

    The stock market has performed well in 19 years. The Shanghai and Shenzhen 300, SSE 50 and GEM sectors have risen by 24.7%, 18.5% and 41.8% respectively in the past 19 years. We believe that the equity market is at the bottom of the medium term and will see a turbulent upward trend in the future:1The stock market is low in valuation and cost-effective.After 19 years of rising, the overall valuation of the stock market has improved significantly. As of March 1, 2019, the Wind All A Index, the Shanghai and Shenzhen 300, and the SSE 50 Average P/E (PE-TTM) were 16, 12.3, and 10 times, respectively, both of which were around 33% of the quantiles since 2006. Low position. In contrast, the current 10-year government bond yield is around 3.2%, which is around 20% of the quantile since 2006; the upside of the stock market clearly exceeds the bond market.

    2)The policy stabilized the market and the financing bottomed up.In the second half of the year, the macro-policy shifted to stable leverage, actively fiscal efforts, and strengthened the financing of private enterprises, indicating that the current round of policy has emerged. In January 19, the financial data exceeded expectations, and the social welfare rebounded in advance, or it indicates that the financing base has been proved, and the economy has not yet reached the bottom. According to the law of the market leading the bottom of the market, the stock market has previously identified the bottom area.

    3The risk premium has fallen back to a high level.The current stock market risk premium (1/PE-10 year Treasury yield) is around 3.4%, higher than the 2010 average (2.4%), at a 14-year high. The last market risk premium was back to 14 June in a similar high, and it was also the bottom of the stock market in recent years, after which the market ushered in a 15-year bull market. At present, market risk appetite has rebounded, and the risk inflection point has emerged. The stock market valuation is expected to usher in a long-term recovery.

     The peak and the loop, the configuration is the first - the second quarter of 2019, the conversion strategy (Haitong fixed collection Jiang Chao, Jiang Yanshan, Li Bo)

    4.2Convertible bonds have long-term configuration value

    1Industry: Focus on growth and weak cycle industries.We believe that this year's market style or more biased growth, on the one hand, the growth sensitivity of growth stocks is relatively weak, after the 18-year plunge, the current valuation is also low, and there may be valuations in the context of rising risk appetite. Fix the market. On the other hand, monetary policy will remain accommodative this year, and interest rate down will also benefit the valuation of growth stocks. Focus on TMT, photovoltaic, high-end manufacturing and other industries. In addition to growth, 19 years can also focus on opportunities in the weak cycle industry, such as utilities, finance, consumption, military and so on.

    2) Strategy: Hybrid strategy or best.In the past two years, the style of the convertible bond market has fluctuated drastically. In 17 years, the stocks were weak and the stocks were weak. The strong stocks performed better. In 18 years, the stocks were weak and the debts were better. We believe that the market style will be more balanced in the past 19 years, and the hybrid strategy is optimal. The conversion bond configuration should distinguish between the transaction type and the configuration type. For the strong stocks of high-priced bonds, mainly grasp the trading opportunities, pay attention to the fundamentals of the stocks, flexibility, and the premium rate of the convertible bonds. The subject matter of the allocation must take into account the stock and debt, and choose the target that the convertible bond price is not high and the positive stock performance is more certain.

    However, in the short-term, after the convertible bond market experienced a sharp rise, the current bond price is already at a higher level.According to our statistics, the average price of the convertible bond market at the end of 18 was around 100.6 yuan; it has risen to around 112.2 yuan, which is at a high level in 18 years. The proportion of convertible bonds under 100 yuan has dropped significantly from 70% at the end of 18 years to about 16% at present, while the number of convertible bonds above 110 yuan has reached 64, accounting for nearly 50%.

     The peak and the loop, the configuration is the first - the second quarter of 2019, the conversion strategy (Haitong fixed collection Jiang Chao, Jiang Yanshan, Li Bo)

    4.3Convertible debt strategy: looking for undervalued plates

    Looking forward to the second quarter, the downward pressure on the economy has not disappeared, and the trend of corporate earnings decline is still in progress. The core of the first half of the stock market is still the valuation repair. Therefore, the choice of coupons needs to pay attention to performance-valuation matching, as well as the absolute price and flexibility of convertible bonds. Some of the coupons with larger gains are currently at a high price, and there is a certain risk of callback; more attention can be paid to the sector where the recent gains are not large, the convertible bond price and the underlying stock are undervalued.

    We selected PE-TTM from the convertible bonds to be below the 50% quantile of the past three years; the fundamentals of the underlying stocks are good and the performance is stable; the absolute price of the convertible bonds and the premium rate are within the reasonable range, and the industry grows and Weak cycle is the main focus, you can pay attention to:

    1) Consumer electronics (grand, crystal), environmentally friendly buildings (Lingnan, Gaoneng), automobiles (Xinquan, Del), photovoltaic (Linyang), consumption (Haicang), media (Ji Shi), etc.

    2) Some of the strong vouchers have a higher growth rate recently, and the valuation is not low. They can wait for the layout opportunities after the callback, such as Longji, Shuguang, Jiadu, Guojun, Changzheng and so on.

    Risk warning: The stock market fell sharply, the performance was less than expected, and the policy was less than expected.

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