Group 1 - The report indicates that the recent stock market has shown an upward trend, leading to an increased preference for convertible bonds among incremental funds. The median price changes across various parity ranges of convertible bonds have risen, particularly for equity-sensitive convertible bonds, reflecting market pricing based on future expectations of underlying stock price increases [3][12]. - The report constructs a convertible bond valuation index based on individual bonds and their corresponding parity ranges, which helps track funding allocation and identify investment opportunities. Notable increases in valuations were observed in sectors such as non-ferrous metals, building materials, power equipment, machinery, and basic chemicals, attributed to price increases in these sectors and a potential reversal in the real estate chain's economic conditions [3][12]. - The report suggests that the current funding environment is relatively ample, supporting the notion that equity-sensitive convertible bonds may experience a "rise easy, fall hard" trend in the short term, indicating strong trading value, especially for popular equity-sensitive convertible bonds [3][12]. Group 2 - The weekly convertible bond strategy highlights that the inflow of incremental funds into the market is expected to continue, with a likely "spring excitement" market trend at the beginning of the year. The focus is on investment opportunities in technology and high-end manufacturing sectors [4][17]. - As institutional investors' share in the convertible bond market increases, their expectations for the stock market are expected to have a deeper impact on convertible bond valuations. The report notes that the current investor sentiment towards the medium to long-term stock market remains optimistic, which may sustain demand for equity assets and provide support for convertible bond valuations [4][17]. - The report recommends focusing on convertible bonds in sectors such as technology, driven by rising overseas computing power demand and domestic AI industrialization, as well as high-end manufacturing, which is expected to maintain high levels. Specific convertible bonds to watch include those from companies like Ruike, Qizhong, Yake, Daimai, Xingrui, Huachen, and Yubang [4][17].

Group 1: Market Conditions - From January 12 to January 16, 2026, the CSI Convertible Bond Index rose by +1.08% (last week's increase was +4.45%), and the CSI All-Share Index changed by +0.47% (last week's increase was +5.04%). Since 2026, the CSI Convertible Bond Index has risen by +5.57%, and the CSI All-Share Index has risen by +5.54% [1] - By bond rating, high-rated bonds (AAA), medium-high-rated bonds (AA+), medium-rated bonds (AA), medium-low-rated bonds (AA-), and low-rated bonds (AA- and below) rose by -1.17%, +0.45%, +0.90%, -0.01%, and -0.68% respectively this week, with medium-rated bonds having the highest increase [1] - By convertible bond scale, large-scale convertible bonds (bond balance > 2 billion yuan), medium-large-scale convertible bonds (balance between 1.5 and 2 billion yuan), medium-scale convertible bonds (balance between 1 and 1.5 billion yuan), small-medium-scale convertible bonds (balance between 0.5 and 1 billion yuan), and small-scale convertible bonds (balance < 0.5 billion yuan) rose by -1.14%, +2.24%, +1.78%, -0.57%, and -0.07% respectively this week, with medium-large-scale convertible bonds having the highest increase [2] - By conversion parity, ultra-high parity bonds (conversion value > 130 yuan), high parity bonds (conversion value between 120 and 130 yuan), medium-high parity bonds (conversion value between 110 and 120 yuan), medium parity bonds (conversion value between 100 and 110 yuan), medium-low parity bonds (conversion value between 90 and 100 yuan), low parity bonds (conversion value between 80 and 90 yuan), and ultra-low parity bonds (conversion value < 80 yuan) rose by -1.39%, -1.40%, -0.52%, +0.60%, +0.08%, -0.35%, and -0.97% respectively this week, with medium parity bonds having the highest increase [2] Group 2: Convertible Bond Price, Parity, and Conversion Premium Ratio - As of January 16, 2026, there were 396 outstanding convertible bonds (398 at the end of last week), with a balance of 548.444 billion yuan (551.501 billion yuan at the end of last week) [3] - The average convertible bond price was 137.71 yuan (137.03 yuan at the end of last week), with a percentile of 99.59% (from the beginning of 2023 to January 16, 2026) [3] - The average convertible bond parity was 106.52 yuan (104.54 yuan at the end of last week), with a percentile of 98.64% [3] - The average convertible bond conversion premium ratio was 33.01% (32.80% at the end of last week), with a percentile of 44.35% [3] Group 3: Convertible Bond Performance and Allocation Direction - The convertible bond market rose this week. Under the current supply-demand pattern of convertible bonds, the driving effect of the underlying stocks is expected to be strong, and the valuation may still have upward room. It is recommended to select bonds carefully, comprehensively judge based on convertible bond terms and underlying stock conditions, and pay attention to industries catalyzed by policies and industries with high prosperity [4] Group 4: Top 15 Convertible Bonds by Increase This Week | Rank | Convertible Bond Name | Underlying Stock Name | Industry | Latest Closing Price (Yuan) | Convertible Bond Increase (%) | Underlying Stock Increase (%) | | --- | --- | --- | --- | --- | --- | --- | | 1 | Jin05 Convertible Bond | Jinpan Technology | Power Equipment | 198.89 | 26.44 | 1.07 | | 2 | Huayi Convertible Bond | Feikang Haojing | Pharmaceutical Biology | 263.55 | 24.20 | 22.98 | | 3 | Dingjie Convertible Bond | Dingjie Shuzhi | Computer | 236.00 | 23.72 | 15.74 | | 4 | Haohan Convertible Bond | Haohan Shendu | Computer | 196.17 | 22.35 | 30.57 | | 5 | Jingce Zhuan2 | Jingce Electronics | Machinery and Equipment | 254.00 | 21.95 | 26.69 | | 6 | Weice Convertible Bond | Weice Technology | Electronics | 285.73 | 21.88 | 20.31 | | 7 | Taifu Convertible Bond | Taifu Quanye | Machinery and Equipment | 177.28 | 19.54 | 8.96 | | 8 | Jiaoxi Convertible Bond | Jiaoxi Electronics | Electronics | 246.66 | 19.06 | 24.43 | | 9 | Anji Convertible Bond | Anji Technology | Electronics | 294.89 | 18.21 | 12.69 | | 10 | Huicheng Convertible Bond | Huicheng Co., Ltd. | Electronics | 339.18 | 18.02 | 23.16 | | 11 | Dinglong Convertible Bond | Dinglong Co., Ltd. | Electronics | 278.71 | 17.35 | 6.95 | | 12 | Lanxiao Zhuan02 | Jianyuan Technology | Basic Chemicals | 179.47 | 16.92 | 9.06 | | 13 | Chaoda Convertible Bond | Chaoda Equipment | Automobile | 179.00 | 15.30 | 4.94 | | 14 | Dianhua Convertible Bond | Xiangtan Electrochemical | Power Equipment | 178.47 | 15.29 | -0.14 | | 15 | Jingda Convertible Bond | Jingda Co., Ltd. | Power Equipment | 530.61 | 14.35 | 4.55 | [17]

Report Industry Investment Rating - Not mentioned in the provided content Core Viewpoints - At the beginning of the year, the equity market had a good start. Coupled with a decline in call risk and an increase in unexpected non - call cases, convertible bonds (CBs) simultaneously boosted their valuations. This week, CBs outperformed their underlying stocks, with high - price and long - duration CBs leading the gains. The 100 - yuan premium rate and the median CB price reached new highs since 2017. In the future, considering the high - expected profit - loss ratio of the asset side and the trading - oriented mindset of the liability side, the volatility of the CB market will increase, and the risk of "missing out" is higher. Therefore, investment strategies should de - emphasize timing and abandon position differences [5][6]. Summary by Directory 1. Weekly Viewpoint and Outlook - The equity market had a good start at the beginning of the year. With reduced call risk and more unexpected non - call cases, CBs' valuations were boosted. This week, CBs outperformed underlying stocks, and high - price and long - duration CBs led the rise. The 100 - yuan premium rate and the median CB price reached new highs since 2017. In the future, the CB market's volatility will increase, and the "missing out" risk is higher. Investment strategies should de - emphasize position timing [5][6]. 2. CB Valuations - This week, the market rose significantly, and the 100 - yuan premium rate increased by 2.0% to 33.0%, a new high since 2017. After excluding outliers, the full - market 100 - yuan premium rate was 33.0%, up 2.0% week - on - week, at the 100.0% percentile since 2017 [5][7]. - Valuations in all parity ranges increased significantly this week. The valuation increase in the equity - biased and bond - biased areas was greater than that in the balanced area. The rise in the equity market led to an increase in the parity of bond - biased CBs and their valuations. The increase in unexpected non - call CBs and the strong upward momentum of underlying stocks also drove up the valuations of equity - biased CBs [5][12]. - From an individual bond perspective, in the high - parity area, most CBs with large valuation increases were non - call ones, such as Dinglong, Borui, and Yanggu. The conversion premium rates of Dianhua and Wankai CBs dropped below 10%, implying a certain call expectation. In the balanced and bond - biased areas, valuations mostly increased, mainly driven by the rapid rise of underlying stocks, such as Shenxun, Weixin, Rundong, and Yaoji [12][13]. - As of now, from the perspective of conversion premium rate, the weighted conversion premium rate percentiles of the parity range above 50 yuan are close to 100%, while the historical percentiles of the 80 - 90 yuan and 110 - 120 yuan parity ranges are relatively low. From the perspective of the bottom - support premium rate, the weighted bottom - support premium rate percentiles of the parity range above 100 yuan are close to 100%, and the historical percentiles of the 70 - 90 yuan parity range are relatively low [15][16]. 3. Clause Tracking 3.1 Redemption - This week, Huanxu and Huarui CBs announced redemptions, and 5 CBs announced non - redemptions, with a call rate of 29%. Currently, there are 31 CBs in the redemption process. Next week, 9 CBs are expected to meet the redemption conditions, and 8 are expected to issue announcements of potential call triggers. In addition, 21 CBs are expected to enter the call counting period within the next month [20][22]. 3.2 Downward Revision - This week, Fangyuan and Lanfan CBs proposed downward revisions. As of now, 103 CBs are in the non - downward - revision period, 19 CBs cannot be downward - revised due to net asset constraints, 1 CB has triggered the condition but the stock price is still below the downward - revision trigger price without an announcement, 23 CBs are accumulating downward - revision days, and 4 CBs have issued downward - revision board proposals but have not yet gone to the general meeting of shareholders [27]. 3.3 Put Option - This week, no CB issued a conditional put option announcement. As of now, 5 CBs are accumulating put - option trigger days, among which 3 are also accumulating downward - revision days, and 2 are in the non - downward - revision period [29]. 4. Primary Issuance - As of now, there are 9 CBs in the approved - registration progress, with a total issuance scale of 1.1 billion yuan, and 5 CBs in the listing - committee - approved progress, with a total issuance scale of 290 million yuan [31].

1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - Since December 2025, convertible bonds have seen a new round of recovery. High - parity equity - biased convertible bonds led the rise, and the military sector under the commercial space theme had a large increase. High - parity convertible bond valuations returned to high levels, but the valuations of debt - biased convertible bonds loosened. Convertible bonds are expected to benefit from the rise of the equity market and the activity of small and micro - cap stocks, but beware of the valuation risks of "double - high" convertible bonds represented by newly - issued ones [3][4]. - The market declined slightly this week, but the 100 - yuan premium rate rose 0.3% to 31.1%, approaching the high point on August 25, 2025. The overall valuation of the equity - biased area was better than that of the debt - biased and balanced areas this week [3][5]. - This week, Yingtai Convertible Bond announced redemption with a 100% forced redemption rate. One convertible bond proposed a downward revision, and Hongchuan Convertible Bond announced the downward revision result without reaching the bottom. Shanbo Convertible Bond issued a conditional put - back notice [20][26][28]. 3. Summary by Relevant Catalogs 3.1 Weekly View and Outlook - Since December 2025, high - parity equity - biased convertible bonds led the rise in the recovery. Due to the commercial space theme and the release of forced redemption risks, high - parity convertible bond valuations returned to high levels. The valuations of debt - biased convertible bonds loosened due to the shortening of the remaining term and weaker - than - expected downward revisions. Convertible bonds are expected to benefit from the equity market and small - cap stocks, but beware of "double - high" convertible bond valuation risks [3][4]. 3.2 Convertible Bond Valuation - The market declined slightly this week, and the 100 - yuan premium rate rose 0.3% to 31.1%, close to the 2025/8/25 high of 31.4%. After excluding outliers, the market - wide 100 - yuan premium rate was 31.1%, up 0.3% this week, at the 99.8% percentile since 2017 [3][5]. - By observing different parity intervals, the equity - biased area's valuation was better than the debt - biased and balanced areas this week. The 120 - 140 yuan parity interval's valuation rose slightly, and the over - 140 yuan parity interval's valuation was roughly flat [3][9]. - In the high - parity area, convertible bonds with significant valuation declines were those in the redemption process or "double - high" ones. In the medium - and low - parity area, they were near - maturity or non - downward - revised convertible bonds [3][12]. - From the perspective of the conversion premium rate, the 110 - 120 yuan and 80 - 90 yuan parity intervals had relatively low historical quantiles. From the perspective of the bottom - protection premium rate, the 70 - 90 yuan parity interval had relatively low historical quantiles [3][16]. 3.3 Clause Tracking 3.3.1 Redemption - This week, Yingtai Convertible Bond announced redemption, and no convertible bond announced non - redemption, with a forced redemption rate of 100%. There are currently 12 convertible bonds that have issued forced redemption or maturity redemption announcements but have not delisted, with a potential conversion or maturity balance of 4 billion yuan [20]. - There are 27 convertible bonds currently in the redemption process. Seven are expected to meet the redemption conditions next week, and 12 are expected to issue potential redemption trigger announcements. Seventeen convertible bonds are expected to enter the forced redemption counting period within the next month [22]. 3.3.2 Downward Revision - One convertible bond proposed a downward revision this week, and Hongchuan Convertible Bond announced the downward revision result without reaching the bottom. As of now, 111 convertible bonds are in the non - downward - revision interval, 19 cannot be downward - revised due to net asset constraints, 1 has triggered the condition but has not announced, 22 are accumulating downward - revision days, and 2 have issued board proposals for downward revision but have not held a general meeting of shareholders [26]. 3.3.3 Put - back - Shanbo Convertible Bond issued a conditional put - back notice this week. As of now, 5 convertible bonds are accumulating put - back trigger days, among which 3 are also accumulating downward - revision days, and 2 are in the non - downward - revision interval [28]. 3.4 New Issuance Progress - As of now, there are 9 convertible bonds in the approval - in - progress stage, with a to - be - issued scale of 11.2 billion yuan; and 6 in the listing - committee - approved stage, with a to - be - issued scale of 3.4 billion yuan [30].

Report Industry Investment Rating No information provided in the content. Core Viewpoints of the Report - Since December 2025, convertible bonds have witnessed a new round of recovery. In this round, high - parity equity - biased convertible bonds led the rise, with the military industry sector rising significantly under the commercial space theme. Due to the phased release of call risks, the valuation of high - parity convertible bonds has returned to a high level. However, the shortening of the remaining term and the weaker - than - expected downward revision of convertible bonds have caused the valuation of debt - biased convertible bonds to loosen. The convertible bond valuation structure has changed compared with the previous period. From the end - of - 2025 performance, risk appetite remains high, and the expectation of a spring rally is consistent. Convertible bonds are expected to benefit from the rise of the equity market and the activity of small and micro - cap stocks. But considering the high valuation of equity - biased convertible bonds and the recent significant decline of some "double - high" convertible bonds, be vigilant against the valuation risks of "double - high" convertible bonds represented by newly issued convertible bonds [4]. Summary by Relevant Catalog 1. Convertible Bond Valuation - The market declined slightly this week, and the 100 - yuan premium rate rose 0.3% to 31.1%, approaching the high of 31.4% on August 25, 2025. After excluding abnormal points, the 100 - yuan premium rate of the entire market's convertible bonds is 31.1%, up 0.3% week - on - week, and the latest quantile is at the 99.8% percentile since 2017 [5]. - By grouping and weighted - calculating the valuation changes of individual bonds in comparable terms according to parity, it's found that this week, the valuation of the equity - biased area is better overall than that of the debt - biased and balanced areas. The valuations of the balanced and debt - biased areas mainly declined, the valuation in the 120 - 140 yuan parity range increased slightly, and the valuation in the range above 140 yuan remained roughly flat [10]. - From the perspective of individual bonds, the convertible bonds with a large decline in high - parity area valuation are mainly of two types: those entering the redemption process with the conversion premium rate actively compressed, such as Guanglian Convertible Bond and Songsheng Convertible Bond; and those with significantly compressed "double - high" convertible bond valuations, such as Haohan Convertible Bond and Huicheng Convertible Bond. The convertible bonds with a decline in medium - and low - parity area valuation are those approaching maturity and those with continuous non - downward revision, such as Baolai Convertible Bond and Weil Convertible Bond [13]. - As of the latest data, from the perspective of the conversion premium rate, the historical quantiles of the valuation in the 110 - 120 yuan and 80 - 90 yuan parity ranges are relatively low; from the perspective of the bottom - support premium rate, the historical quantiles of the valuation in the 70 - 90 yuan parity range are relatively low [17]. 2. Clause Tracking 2.1 Redemption - This week, Yingte Convertible Bond announced redemption, and no convertible bond announced not to redeem, with a forced - redemption rate of 100%. Currently, there are 12 convertible bonds that have issued forced - redemption or maturity - redemption announcements but have not been delisted. The potential conversion or maturity balance of the forced - redeemed and matured convertible bonds among the non - delisted ones is 4 billion yuan. There are currently 27 convertible bonds in the redemption process, 7 are expected to meet the redemption conditions next week, and 12 are expected to issue announcements of potential trigger of redemption. In addition, 17 convertible bonds are expected to enter the forced - redemption counting period within the next month [21][23]. 2.2 Downward Revision - One convertible bond proposed a downward revision this week, and Hongchuan Convertible Bond announced the downward - revision result but did not revise to the bottom. As of the latest, 111 convertible bonds are in the non - downward - revision interval, 19 cannot be downward - revised due to net - asset constraints, 1 has triggered the condition but the stock price is still below the downward - revision trigger price and no announcement has been made, 22 are in the process of accumulating downward - revision days, and 2 have issued downward - revision board proposals but have not gone to the general meeting of shareholders [27]. 2.3 Put Option - Shanbo Convertible Bond issued a conditional put - option announcement this week. As of the latest, 5 convertible bonds are in the process of accumulating put - option trigger days, among which 3 are also in the process of accumulating downward - revision days, and 2 are in the non - downward - revision interval [30]. 3. Primary Issuance - As of the latest, there are 9 convertible bonds in the approval - for - registration progress, with a to - be - issued scale of 11.2 billion yuan; there are 6 convertible bonds in the listing - committee - approval progress, with a to - be - issued scale of 3.4 billion yuan [32].

Report Industry Investment Rating No relevant content provided. Core Viewpoints - The convertible bond market generally rose today, with increased valuations, trading sentiment, and a shift towards small - cap value stocks [1]. - The central price of convertible bonds increased, and the proportion of high - price bonds rose [2]. - Most underlying stock industries rose, with different performance in different industries in the convertible bond market [3]. Summaries According to Relevant Catalogs Market Overview - Index performance: The CSI Convertible Bond Index rose 0.38% month - on - month, the Shanghai Composite Index rose 0.36%, the Shenzhen Component Index rose 0.66%, the ChiNext Index rose 0.49%, the SSE 50 Index rose 0.19%, and the CSI 1000 Index rose 0.79% [1]. - Market style: Small - cap value stocks were relatively dominant. Large - cap growth rose 0.40%, large - cap value fell 0.17%, mid - cap growth rose 1.05%, mid - cap value rose 0.91%, small - cap growth rose 0.97%, and small - cap value rose 1.07% [1]. - Fund performance: Trading sentiment in the convertible bond market increased. The trading volume of the convertible bond market was 71.204 billion yuan, a 11.42% month - on - month increase; the total trading volume of the Wind All - A was 1.748742 trillion yuan, a 4.29% month - on - month increase; the net out - flow of main funds in the Shanghai and Shenzhen stock markets was 4.444 billion yuan, and the yield of the 10 - year treasury bond decreased by 0.48bp to 1.83% [1]. Convertible Bond Price - The central price of convertible bonds increased. The weighted average closing price of all convertible bonds was 135.01 yuan, a 0.61% increase from yesterday. Among them, the closing price of equity - biased convertible bonds was 201.30 yuan, a 0.71% increase; the closing price of bond - biased convertible bonds was 119.74 yuan, a 0.37% increase; the closing price of balanced convertible bonds was 130.05 yuan, a 0.17% increase [2]. - The proportion of high - price bonds (above 130 yuan) increased to 60.89%, a 1.84pct increase from yesterday. The largest change in proportion was in the 110 - 120 (including 120) range, with a proportion of 7.61%, a 1.05pct decrease from yesterday. There were 0 bonds with a closing price below 100 yuan. The median price was 133.64 yuan, a 0.48% increase from yesterday [2]. Convertible Bond Valuation - Valuations increased. The fitted conversion premium rate for 100 - yuan par value was 32.51%, a 0.14pct increase from yesterday. The overall weighted par value was 99.53 yuan, a 0.86% increase from yesterday. The premium rate of equity - biased convertible bonds was 15.45%, a 0.27pct decrease; the premium rate of bond - biased convertible bonds was 84.79%, a 0.38pct decrease; the premium rate of balanced convertible bonds was 26.39%, a 0.10pct decrease [2]. Industry Performance - Underlying stock industries: 27 industries rose. The top three rising industries were commerce and retail (+3.66%), light industry manufacturing (+2.17%), and environmental protection (+2.06%); the top three falling industries were banking (-0.44%), electronics (-0.29%), and coal (-0.29%) [3]. - Convertible bond market: 23 industries rose. The top three rising industries were environmental protection (+4.16%), building materials (+2.40%), and building decoration (+1.65%); the top three falling industries were non - bank finance (-1.26%), national defense and military industry (-0.16%), and pharmaceutical biology (-0.15%) [3]. - Different indicators for different sectors: - Closing price: The large - cycle sector rose 1.53%, the manufacturing sector rose 0.49%, the technology sector rose 0.21%, the large - consumption sector rose 0.46%, and the large - finance sector fell 0.68% [3]. - Conversion premium rate: The large - cycle sector decreased 1.5pct, the manufacturing sector decreased 0.33pct, the technology sector decreased 0.96pct, the large - consumption sector decreased 1.8pct, and the large - finance sector decreased 0.86pct [3]. - Conversion value: The large - cycle sector rose 2.65%, the manufacturing sector rose 0.69%, the technology sector rose 0.99%, the large - consumption sector rose 1.19%, and the large - finance sector fell 0.47% [3]. - Pure bond premium rate: The large - cycle sector rose 2.1pct, the manufacturing sector rose 0.75pct, the technology sector rose 0.27pct, the large - consumption sector rose 0.56pct, and the large - finance sector fell 0.79pct [4]. Other Data - Main index performance: Different indices showed different price levels and growth rates, such as the CSI Convertible Bond Index closing at 493.46, with a daily increase of 0.63%, a one - week increase of 2.13%, a one - month increase of 1.96%, and a year - to - date increase of 19.03% [6]. - Style index performance: Small - cap indices generally had better performance than large - cap indices [9]. - Convertible bond valuation: The fitted premium rate for 100 - yuan par value was 33.71%, a 0.08pct increase; the valuation repair index was 3.29%, a 0.13pct decrease; the overall weighted average par value was 101.53, a 0.84% increase; the median price was 133.64, a 0.48% increase [16][17]. - Industry rotation: Industries such as national defense and military industry, light industry manufacturing, and mechanical equipment led the rise, with detailed data on stock price changes, valuation quantiles, etc. [54].

- The report introduces the **CCBA pricing deviation model** to evaluate the valuation level of convertible bonds. The pricing deviation is calculated as: $ Pricing\ Deviation = \frac{Convertible\ Bond\ Price}{CCBA\ Model\ Price} - 1 $ This model highlights that the current pricing deviation of the convertible bond market is 8.12%, which is at the 99.6% and 99.3% percentiles compared to 2018 and 2021 levels, respectively. The model suggests that the market is in a "high valuation, low odds" state, reducing the long-term allocation value of convertible bonds[6][11][23] - The **Convertible Bond & Stock-Bond Rotation Strategy** is constructed based on the CCBA pricing deviation. The Z-score is calculated as: $ Z = \frac{Pricing\ Deviation}{Standard\ Deviation\ of\ Past\ 3\ Years} $ The Z-score is truncated at ±1.5 standard deviations and normalized to a score. Convertible bond weight is determined as: $ Convertible\ Bond\ Weight = 50\% + 50\% \times Score $ The remaining allocation is assigned to a stock-bond portfolio (50% 7-10Y Treasury + 50% CSI 1000 Total Return Index). This strategy achieves stable excess returns by overweighting convertible bonds during undervaluation and vice versa[11][17][23] - The **Low Valuation Strategy** uses the CCBA_out model, which incorporates delisting risk into the CCBA pricing model. The pricing deviation is calculated as: $ Pricing\ Deviation = \frac{Convertible\ Bond\ Price}{CCBA\_out\ Model\ Price} - 1 $ The strategy selects the 15 convertible bonds with the lowest deviation in each of the three domains (biased debt, balanced, biased equity), forming a pool of 45 bonds. Bonds must have a balance of over 3 billion and a rating of AA- or above. The strategy achieves an absolute return of 20.5% and an excess return of 9.7% since 2018[23][25][26] - The **Low Valuation + Strong Momentum Strategy** combines the CCBA_out pricing deviation factor with the stock momentum factor. The stock momentum factor is constructed using equal-weighted scores of stock returns over the past 1, 3, and 6 months. This strategy achieves an absolute return of 24.3% and an excess return of 13.1% since 2018, with strong elasticity[26][28][29] - The **Low Valuation + High Turnover Strategy** selects the lowest 50% valuation convertible bonds based on the CCBA_out pricing deviation. Within this pool, convertible bonds with high turnover rates are chosen using turnover factors (5-day and 21-day turnover rates). This strategy achieves an absolute return of 23.2% and an excess return of 12.1% since 2018[29][31][32] - The **Balanced Biased Debt Enhanced Strategy** selects the lowest 50% valuation convertible bonds based on the CCBA_out pricing deviation. Biased debt bonds are further filtered using turnover rate and stock momentum factors, while balanced bonds are filtered using turnover rate factors. This strategy achieves an annualized absolute return of 22.3%, with volatility and drawdown controlled at 7.6% and 4.5%, respectively[32][34][35] - The **Credit Bond Substitution Strategy** filters convertible bonds with YTM+1% greater than the YTM of 3-year AA-rated credit bonds. Convertible bonds must have a balance of over 3 billion and a rating of AA- or above. Within this pool, the top 20 bonds with the strongest 1-month stock momentum are selected, with individual bond weights capped at 2%. Remaining allocation is assigned to credit bonds. This strategy achieves an absolute return of 7.1%, with volatility and drawdown below 3%[35][36][37] - The **Volatility Control Strategy** combines enhanced strategies for biased debt, balanced, and biased equity convertible bonds, along with credit bonds. The portfolio volatility is controlled at 4% using a volatility control method. This strategy achieves an absolute return of 9.4%, with volatility and drawdown controlled at 4%-5%[37][39][41] - **Performance Metrics** for the strategies: - **Low Valuation Strategy**: Annualized return of 20.5%, excess return of 9.7%, IR of 1.64[26] - **Low Valuation + Strong Momentum Strategy**: Annualized return of 24.3%, excess return of 13.1%, IR of 2.25[29] - **Low Valuation + High Turnover Strategy**: Annualized return of 23.2%, excess return of 12.1%, IR of 1.95[32] - **Balanced Biased Debt Enhanced Strategy**: Annualized return of 22.3%, volatility of 12.1%, drawdown of 13.9%[35] - **Credit Bond Substitution Strategy**: Annualized return of 7.1%, volatility of 2.1%, drawdown of 2.8%[37] - **Volatility Control Strategy**: Annualized return of 9.4%, volatility of 4.4%, drawdown of 4.4%[41]

1. Report Industry Investment Rating No information provided in the content. 2. Core Viewpoints of the Report - This week, micro - cap stocks recovered. Convertible bonds rose following the underlying stocks. High - priced convertible bonds performed weakly. Low - priced convertible bonds performed strongly due to factors such as an increase in downward revision cases and the rise of underlying stocks. The increase of convertible bonds was significantly lower than that of underlying stocks due to the drag of high - priced convertible bonds [2][3]. - There are two structural characteristics. Firstly, the valuation of near - maturity convertible bonds is under great valuation attenuation pressure, especially non - financial convertible bonds with high previous valuations. Secondly, the call risk remains at a high level. Convertible bonds that were not called before have successively re - entered the call period, and the change in call expectations also leads to price pressure [2][3]. - In the case of a positive expectation for the equity market, there are still beta opportunities in the convertible bond market, but the valuation attenuation of near - maturity convertible bonds and call risks need to be focused on [2][3]. 3. Summary of Each Section 3.1 Weekly Viewpoint and Outlook - Micro - cap stocks recovered this week. Convertible bonds followed the underlying stocks to rise. High - priced convertible bonds were weak, while low - priced convertible bonds were strong. The increase of convertible bonds was significantly lower than that of underlying stocks [2][3]. - The valuation of near - maturity convertible bonds, especially non - financial ones, faced great attenuation pressure. The call risk remained high, and the change in call expectations led to price pressure [2][3]. - There are beta opportunities in the convertible bond market, but near - maturity valuation attenuation and call risks need attention [2][3]. 3.2 Convertible Bond Valuation - This week, the underlying stocks and convertible bonds recovered. The 100 - yuan premium rate slightly increased by 0.4% and returned above 30%. After excluding outliers, the 100 - yuan premium rate of the whole market's convertible bonds was 30.2%, up 0.4% week - on - week, and the latest quantile was at the 99.5% percentile since 2017 [2][4][5]. - The valuation structure changed. The valuation of the bond - biased area was better than that of the stock - biased area. The bond - biased area's valuation improved due to more downward revision cases and rising parity. The stock - biased area's valuation was weak due to call risks, and the conversion premium rate of the 130 - 140 yuan parity range increased significantly [2][9]. - In terms of individual bonds, among balanced and bond - biased convertible bonds, those with a large decline in valuation were mainly near - maturity ones like Hua'an, Guotou, and Jianyou Convertible Bonds. Among stock - biased convertible bonds, those with a rapid convergence of valuation due to call expectations were Hengshuai, Borui, and Jingzhuang Convertible Bonds [2][14]. - The median price of convertible bonds was reported at 132.04 yuan, up 1.14 yuan from last week, and the yield to maturity was - 6.81%, down 0.25% from last week. Their current quantiles were at the 98.60 and 0.70 percentiles since 2017 respectively [2][18]. 3.3 Clause Tracking 3.3.1 Redemption - This week, Bo 23 and Furong Convertible Bonds announced redemption, and Huayi Convertible Bond announced non - redemption, with a call rate of 67%. There are currently 18 convertible bonds that have issued call or maturity redemption announcements but have not delisted, and the potential conversion or maturity balance of call and maturity convertible bonds is 5.2 billion yuan [2][21]. - There are 26 convertible bonds currently in the redemption progress. 9 are expected to meet the redemption conditions next week, and 7 are expected to issue announcements that they are likely to trigger redemption. In addition, 9 convertible bonds are expected to enter the call counting period within the next month [2][26]. 3.3.2 Downward Revision - This week, Yuxing Convertible Bond proposed a downward revision, and Lanfan and Tianneng Convertible Bonds announced the downward revision results, both of which did not revise to the bottom. As of now, 114 convertible bonds are in the non - downward - revision period, 20 cannot be downward - revised due to net asset constraints, 1 has triggered the condition but has not issued an announcement, 24 are accumulating downward - revision days, and 4 have issued board proposals for downward revision but have not gone to the general meeting of shareholders [2][29]. 3.3.3 Put Option - This week, Huahai Convertible Bond issued a conditional put option announcement. As of now, 4 convertible bonds are accumulating put - option trigger days, among which 1 is also accumulating downward - revision days, and 3 are in the non - downward - revision period [2][31]. 3.4 Primary Issuance - Dingjie Convertible Bond was issued this week, and there will be no convertible bond issuance next week. As of now, Aohong, Shenyu, and Tianzhun Convertible Bonds have been issued but not yet listed, and Puxun Convertible Bond will be listed on December 22, 2025 [33]. - There are currently 7 convertible bonds in the approved - registration progress, with a pending issuance scale of 8.6 billion yuan; 10 convertible bonds are in the listing - committee - approved progress, with a pending issuance scale of 8.5 billion yuan [33].

- The report constructs a valuation indicator called "Hundred Yuan Conversion Premium Rate" to compare the valuation of convertible bonds and their underlying stocks over time[3] - The "Hundred Yuan Conversion Premium Rate" rolling three-year percentile is at 98.00%, and the rolling five-year percentile is at 94.50% as of December 12, 2025[3][16] - The report constructs a valuation indicator called "Adjusted YTM - Credit Bond YTM" to compare the valuation of debt-biased convertible bonds and credit bonds[4] - The "Adjusted YTM - Credit Bond YTM" median is -3.95% as of December 12, 2025, indicating a low overall cost-effectiveness of debt-biased convertible bonds[4][16] - The report constructs two valuation deviation factors: Conversion Premium Deviation Factor and Theoretical Value Deviation Factor (Monte Carlo Model), and combines them into a Comprehensive Convertible Bond Valuation Factor[5] - The Comprehensive Convertible Bond Valuation Factor is constructed as follows: $$ \text{Comprehensive Convertible Bond Valuation Factor} = \text{Rank}(\text{Conversion Premium Deviation}) + \text{Rank}(\text{Theoretical Value Deviation (Monte Carlo Model)}) $$ [22] - The Conversion Premium Deviation Factor is calculated as: $$ \text{Conversion Premium Deviation} = \text{Conversion Premium} - \text{Fitted Conversion Premium} $$ [22] - The Theoretical Value Deviation Factor (Monte Carlo Model) is calculated as: $$ \text{Theoretical Value Deviation} = \frac{\text{Convertible Bond Closing Price}}{\text{Theoretical Value}} - 1 $$ [22] - The report constructs three low-valuation equal-weight indices: Equity-biased Convertible Bond Low Valuation Index, Balanced Convertible Bond Low Valuation Index, and Debt-biased Convertible Bond Low Valuation Index[20] - The report constructs a Convertible Bond Style Rotation Portfolio using Convertible Bond 20-day Momentum and Convertible Bond Volatility Deviation as market sentiment capture indicators, with bi-weekly rebalancing[5][28] - The Convertible Bond Style Market Sentiment Capture Indicator is constructed as follows: $$ \text{Convertible Bond Style Market Sentiment Capture Indicator} = \text{Rank}(\text{Convertible Bond 20-day Momentum}) + \text{Rank}(\text{Volatility Deviation}) $$ [29] Model Backtest Results - Comprehensive Convertible Bond Valuation Factor in equity-biased, balanced, and debt-biased convertible bonds enhanced excess returns of -2.89%, -0.82%, and -0.74% respectively over the past two weeks as of December 12, 2025[5][24] - Equity-biased Convertible Bond Low Valuation Index: Annualized Return 25.86%, Annualized Volatility 20.68%, Maximum Drawdown 22.94%, IR 1.25, Calmar Ratio 1.13[25] - Balanced Convertible Bond Low Valuation Index: Annualized Return 14.96%, Annualized Volatility 11.97%, Maximum Drawdown 15.95%, IR 1.25, Calmar Ratio 0.94[25] - Debt-biased Convertible Bond Low Valuation Index: Annualized Return 12.11%, Annualized Volatility 9.83%, Maximum Drawdown 17.78%, IR 1.23, Calmar Ratio 0.68[25] - Convertible Bond Style Rotation: Annualized Return 24.52%, Annualized Volatility 16.81%, Maximum Drawdown 15.89%, IR 1.46, Calmar Ratio 1.54[34]

Group 1 - The convertible bond market is experiencing a surge in issuance as the year-end approaches, with investors showing high enthusiasm for new offerings [1][2] - Five new convertible bonds have been launched in December, covering various cutting-edge sectors such as smart manufacturing and electronic technology, with total issuance reaching 30.23 billion yuan, an increase from 28.63 billion yuan in November [2] - The total number of convertible bonds issued this year has reached 47, with a total issuance scale of 623.12 billion yuan, showing a significant increase compared to 41 bonds and 367.57 billion yuan in 2024 [2] Group 2 - Despite the increase in new bond issuance, the market remains in a state of supply-demand imbalance, with the total market size of outstanding convertible bonds shrinking to 561.86 billion yuan, down 171.77 billion yuan from the beginning of the year [4] - A total of 158 convertible bonds have exited the market this year, including several large-scale bonds, indicating a trend of market contraction [4] - The number of convertible bonds maturing in 2026 is significant, with 68 bonds totaling approximately 81.2 billion yuan, which is expected to contribute to continued market contraction [5] Group 3 - The valuation of convertible bonds is expected to remain high due to a recovering equity market, particularly in the technology sector, with several brokerages predicting stable but elevated valuations in 2026 [6][7] - The demand for convertible bonds is anticipated to remain strong, especially from "fixed income plus" products, which will support high valuations amid a tight supply-demand balance [7] - The optimistic outlook for the equity market, driven by policy incentives and strong demand for equity assets, is expected to bolster the value of convertible bonds [7]