——Conversion premium rate characteristics and investment strategies Convertible bonds have gradually become one of the most important investment types for people because they combine equity and debt characteristics, and have the advantages of being able to attack when going up and defensive when retreating.

Judging from the results of our current research, when the stock market is on an upward trend, convertible bonds are mainly equity-based; when the stock market is on a decline, their debt-based properties perform prominently.

So when the stock market is in turbulence and adjustment, it is very important to adjust the chips, increase the holdings of convertible bonds, control investment risks, and obtain the benefits brought by the rising stock market.

According to analysis, the risk of convertible bond investment mainly depends on the price trend of its underlying stock and the comparative effect between the convertible bond conversion value and the stock price.

We used 22 convertible bonds listed and traded on the Shenzhen and Shanghai stock exchanges as research samples, and used the research time window from June 1, 2002 to March 23, 2004 to study the conversion value of convertible bonds and their underlying stocks.

Distribution characteristics of premium rates between prices, and implications for convertible bond investment.

The premium rate distribution has rules to follow. Based on the comparative relationship between the market price of convertible bonds and the conversion price and redemption price of convertible bonds, we studied the relationship between the conversion value of each convertible bond and the stock market price in three periods.

From the analysis results (see attached table for details), there are the following characteristics: 1. When the price of the underlying stock is less than the conversion price agreed in the convertible bond issuance terms, except for those that have not yet entered the conversion period,

Except for West China Convertible Bonds, the conversion premium rates of other convertible bonds were almost universally positive during the study period, that is, the conversion value of the convertible bonds was greater than the market price.

During this period, the conversion value of convertible bonds was higher than the stock market price. On the one hand, it reflected that the market was optimistic about the future trend of the underlying stocks of convertible bonds. On the other hand, it also reflected that when the market was in recession, convertible bonds

defensive value-preserving function.

It is worth mentioning that in mature foreign markets, due to the existence of a short-selling mechanism, it is unlikely that convertible bonds will have a large positive premium rate. If it occasionally occurs, the stock price may rise, and the price of convertible bonds will fall accordingly.

In my country, according to our research, the price of most convertible bonds' underlying stocks only has a unilateral pulling effect on the price of convertible bonds.

2. When the price of the underlying stock is between the conversion price and the redemption price, except for 3 stocks such as Guiguan Convertible Bonds, Huaxi Convertible Bonds, and Silk Transfer 2, the price of the underlying stock has always been lower than the conversion price during the study period, and the other 19 stocks

In all convertible bonds, the price of the underlying stock is greater than the conversion price. Almost all of these 19 bonds have begun to experience negative premium rates for the conversion value of convertible bonds.

Due to different industries and development periods, the proportion of trading days with negative premium rates on convertible bonds to total trading days varies.

Among them, several convertible bonds that have not yet entered the conversion period have a high proportion of negative conversion premium rates, generally above 80%. This may be mainly because the convertible bonds have basically had conversion value, but cannot

Immediate conversion into stocks involves a certain lag risk, so the increase in the price of convertible bonds is smaller than the increase in the price of the underlying stock. Moreover, according to our research, before the convertible bonds enter the conversion period, the price of the underlying stock is less than the price of the convertible bonds.

The pull effect is the weakest.

Convertible bonds with promising development prospects for industries and companies and rapidly rising stock prices, such as Minsheng, Steel and Vanadium, Tongdu, and Vanke, also have a high proportion of negative conversion premium rates, generally around 50%.

The proportion of other convertible bond conversion premium rates with negative values ??is relatively low, generally below 30%.

3. The underlying stock price is greater than the redemption price.

Currently, 8 of the convertible bonds listed and traded on the exchange have experienced stock prices greater than the redemption price. Among them, steel and vanadium convertible bonds have ceased listing and trading. Airport convertible bonds, Vanke convertible bonds, and Minsheng convertible bonds have met the mandatory requirements.

Redemption Conditions.

The existence of mandatory redemption exposes investors to certain redemption risks. This risk is mainly reflected in two aspects: On the one hand, the agreed redemption price is generally much lower than the market price of convertible bonds. Therefore, if the redemption is accepted,

If the redemption occurs, there will be a greater risk of loss; on the other hand, since accepting redemption will result in greater losses, the strategy adopted by the vast majority of holders of convertible bonds is to sell the convertible bonds before the redemption period.

Converting the convertible bonds into stocks and then selling the stocks may expose investors to the risk of concentrated conversion and sales of convertible bonds before the redemption period, which will impact the price of the underlying stock.

It is precisely because of the existence of redemption risk that when the stock price is greater than the redemption price, the negative conversion premium rates of the 8 convertible bonds account for a high proportion of the total trading day, with an average proportion of 70.22% and an average premium rate of 70.22%.

-1.86%.

4. Negative premium rates mainly occur when convertible bonds have not yet entered the conversion period and the underlying stock price is higher than the redemption price.

Among them, when the convertible bond has not yet entered the conversion period, the absolute value of the negative premium rate is relatively large, and when the stock price is higher than the redemption price, the absolute value of the premium rate is small, generally not higher than 5%. This is

On the one hand, it reflects that investors are avoiding the risk of being unable to convert shares smoothly or the risk of redemption, so the market needs certain risk compensation; on the other hand, the absolute value of the premium rate after entering the share conversion period cannot be too high, because

If the premium rate is too high, investors can take advantage of the arbitrage opportunity between the convertible bonds and their underlying stocks to obtain income, thereby promoting the conversion value of the convertible bonds to return to the stock market price.