Core Insights - The report discusses the dual nature of forced redemption (strong redemption) of convertible bonds, highlighting it as a favorable event for investors but also a risk for the bonds themselves [2] - Approximately 80% of convertible bonds exit the market through forced redemption, with 422 out of 512 bonds having been redeemed this way as of April 18, 2025 [7][8] - The report outlines the evolution of redemption rules, indicating a trend towards more standardized processes in the market [15][16] Group 1: Concept of Forced Redemption - Forced redemption is a primary exit strategy for convertible bonds, often triggered during bull markets, with a significant percentage of bonds having high conversion ratios [3][4] - The conditions for forced redemption typically include stock prices exceeding 130% of the conversion price for a specified number of trading days or a remaining balance of less than 30 million yuan [3][4] - The report notes that the majority of convertible bonds include forced redemption clauses, with a high concentration of these clauses in recent issuances [4] Group 2: Historical Analysis of Forced Redemption - The report indicates that most convertible bonds execute forced redemption within three triggers, with execution rates increasing in recent years, particularly in 2024 [26][34] - The analysis shows that the execution rate of forced redemption has improved, with a notable increase in the proportion of bonds opting for redemption in 2024 compared to previous years [34][36] - It is observed that bonds that do not execute forced redemption often have high parity levels and low conversion pressure, leading to a lower likelihood of redemption [34][39] Group 3: Effects of Forced Redemption - The report highlights that forced redemption tends to compress valuations, leading to a decline in the conversion premium, which can negatively impact both the convertible bonds and the underlying stocks [51][52] - Following the announcement of forced redemption, the conversion rate typically accelerates, resulting in a temporary increase in bond prices before a subsequent decline due to increased stock supply [52][59] - The report emphasizes that the market anticipates forced redemption, leading to valuation compression even before the official announcement, with recovery occurring within approximately ten trading days if redemption does not occur [67]