1. Report Industry Investment Rating No investment rating information is provided in the report. 2. Core Viewpoints - Current inflation expectations are rising, and market risk appetite remains low. The operation should be defensive. The double - low strategy is back in the high - win - rate range. Priority should be given to screening undervalued targets by the ZL model, and the core should be balanced convertible bonds with fully compressed valuations and both offensive and defensive capabilities [1]. - The convertible bond market has rebounded slightly, and balanced convertible bonds are both offensive and defensive. Although the convertible bond market has marginally recovered, the overall safety margin is still limited. Attention should be paid to valuation constraints and drawdown risks. Balanced convertible bonds have prominent allocation value [2][11]. - The convertible bond market sentiment has generally warmed up recently. It is recommended to focus on targets with low valuations. Investors should maintain a stable and balanced allocation strategy, avoid crowded varieties with excessive ZL deviation and large short - term cumulative increases, and moderately focus on repair targets with fundamental support and reasonable low - valuation ranges [3][15]. - As the market valuation continues to compress, the cost - effectiveness of convertible bonds is gradually emerging. The double - low strategy focusing on low price and low premium is more effective, and attention can be paid to balanced convertible bonds [4][17]. 3. Summary According to the Directory 3.1 Convertible Bond Weekly Thinking - In the past week (2026/03/23 - 2026/03/27), the sentiment of the convertible bond market marginally warmed up, and the China Securities Convertible Bond Index recorded a slight increase. The large - cap index of convertible bonds fell by 0.14%, while the mid - cap and small - cap indexes rose by 1.8%. The high - price index (2.26%) performed better than the mid - price index (1.45%) and the low - price index (0.45%) [2][11]. - The A - share market is weakly affected by external uncertainties. The US - Iran conflict is intensifying, and the rising oil price exacerbates the global stagflation expectation, suppressing the valuation of equity assets. The convertible bond market has limited safety margins, and the high - volatility attribute of convertible bonds still exists. Balanced convertible bonds have prominent allocation value [2][11]. - According to the back - test results of the Zheshang Fixed - income Quantitative Convertible Bond Model, as of 2026/03/27, the market has fully recovered, and most style factors have risen. There are signs of a slight high - low switch within the momentum factor. The market shows significant characteristics of sentiment warming and general rise and repair. It is recommended to focus on undervalued targets [3][15]. 3.2 Convertible Bond Market 3.2.1 Convertible Bond Market Conditions - The report provides the performance of various convertible bond indexes in different time periods, including the past week, two weeks, since September, one month, two months, half - year, and one - year. For example, the Wande Convertible Bond Energy Index rose 1.72% in the past week, - 3.16% in the past two weeks, and 9.73% since September [22]. 3.2.2 Convertible Bond Individual Securities No specific information about individual convertible bonds is provided in this part other than the list of the top ten and bottom ten gainers and losers in the past week [23][25]. 3.2.3 Convertible Bond Valuation The report shows the valuation trends of bond - type, balanced, and equity - type convertible bonds through relevant charts, including the four - week moving average of the conversion premium rate [27][33]. 3.2.4 Convertible Bond Price The report presents the price median and the proportion of high - price bonds through relevant charts [35][37].

Report Industry Investment Rating No relevant information provided. Core Viewpoints - In December 2025, the equity market continued to recover and outperformed the CSI Convertible Bond Index significantly. The high - price convertible bonds were more elastic in the bull market, while the low - price convertible bonds were more resistant to decline during the market adjustment. The double - low strategy underperformed the high - price and low - premium strategy in the bull market [3][5]. - In 2026, the convertible bond valuation is expected to remain at a high level, and the pressure of individual bond call will increase. When selecting bonds, it is necessary to pay attention to industry rotation and individual bond selection, control risks and pursue elasticity [6][9]. Summary by Directory 1. Convertible Bond Monthly Market Tracking - **Overall Market Performance**: In December, the CSI Convertible Bond Index rose 2.13%, while the CSI All - Share Index rose 3.25%. Throughout 2025, the CSI Convertible Bond Index and the CSI All - Share Index rose 18.66% and 24.6% respectively. The CSI Convertible Bond Index underperformed the CSI 300 Index by 0.15 pct and the CSI 500 Index by 4 pct in December [3][15]. - **Performance by Price Classification**: In December, the Wind high - price convertible bond index rose 5.14%, while the medium - price and low - price convertible bond indexes rose 1.92% and 0.34% respectively. In 2025, the cumulative increases of the high - price, medium - price, and low - price convertible bond indexes were 28%, 16%, and 17% respectively [3][16]. - **Performance by Stock Size Classification**: In December, the Wind medium - cap and small - cap convertible bond indexes rose strongly by 2.52% and 3.23% respectively, while the large - cap convertible bond index fell 0.36%. In 2025, the small - cap convertible bond index rose 27%, leading the large - cap (+11%) and medium - cap (+19%) convertible bonds [19]. - **Performance by Credit Rating**: In December, high - rated convertible bonds continued to be weak. The AAA and AA+ convertible bond indexes rose - 0.01% and +1.87% respectively. In 2025, the AA - and below convertible bond index rose 28%, and the AA convertible bond index rose 25% [22]. - **Performance by Industry**: In December, only the energy (-2.05%) and financial (-0.39%) convertible bond indexes fell, while the corresponding underlying stock indexes rose 1.6% and 2.37% respectively. The largest increases in December were the materials (+3.66%) and optional consumption (+3.51%) convertible bond indexes. In 2025, the top three industries with the largest increases in the convertible bond indexes were materials (+26%), information technology (+25%), and industry (+24%), while the smallest were finance (+5%) and public utilities (+8%) [4][25]. - **Strategy Performance**: In 2025, the double - low strategy underperformed the high - price and low - premium strategy in the equity market bull market. The Wind double - low index rose 0.42% in December, while the high - price and low - premium index rose 5.78%. In 2025, they rose 30% and 12% respectively [5][32]. 2. Convertible Bond Monthly Investment Recommendations 2.1 Double - Low Strategy Recommendations: Grasp Industry Rotation and Focus on Individual Bond Selection - **December Double - Low Portfolio Performance**: In December, the self - constructed double - low portfolio had a return of - 4.72%, while the CSI Convertible Bond Index rose 2.13%. From June to the end of 2025, the cumulative return of the portfolio was 15.25%, underperforming the CSI Convertible Bond Index by 0.06 pct, with a maximum drawdown of - 12.78% [6][35]. - **January 2026 Double - Low Portfolio Recommendation**: Optimistic about the "anti - involution", consumption, robot, and brokerage sectors in January. The number of portfolio targets is reduced to 5, with 3 new targets (Huairui Convertible Bond, Guotou Convertible Bond, Jiayue Convertible Bond) and 2 original targets retained (China Southern Airlines Convertible Bond, Sanfang Convertible Bond). The average convertible bond price, conversion value, conversion premium rate, and double - low value of this portfolio are 122 yuan, 101 yuan, 23%, and 145 respectively [7][38]. 2.2 Industry Allocation Recommendations: Pay Attention to Call Risks, and Technology Remains the Main Line - In 2026, the equity market is still optimistic, which will keep convertible bond prices at a high level and increase the number of individual bonds facing call. It is recommended to choose high - growth technology sectors such as AI, semiconductors, and robots, and also pay attention to the "anti - involution" (chemical, photovoltaic) and consumption sectors with low valuations and expected demand recovery [9][42].

Core Viewpoint - Multiple brokerage firms predict that the convertible bond market will maintain high valuations in 2026, driven by a favorable equity market, policy dividends, and continued inflow of "fixed income +" funds [1][2]. Group 1: Market Conditions - Since 2025, the convertible bond market has seen a significant recovery in valuations, primarily due to reduced risks from delistings and defaults, increased demand in a low-interest-rate environment, and improved stock market expectations [2]. - The China Convertible Bond Index reached a 10-year high in August 2025, reflecting the upward trend in convertible bond valuations [2]. Group 2: Valuation Support Factors - The optimistic outlook for the equity market is expected to be the main support for convertible bond valuations in 2026, with policy dividends from the "14th Five-Year Plan" expected to boost market risk appetite [2]. - Strong demand for equity assets and the ongoing "asset shortage" context will sustain the high valuations of convertible bonds, particularly in the first half of 2026 [2][3]. Group 3: Investment Strategies - The "dual low" strategy, which relies on low prices and low valuations, faces challenges as the number of low-priced convertible bonds decreases and their valuations rise [4]. - Companies are advised to consider index and quantitative strategies due to the increased difficulty in subjective stock selection, focusing on high-price factors and volatility factors [5][6]. Group 4: Sector Focus - Investment focus should be on technology and manufacturing sectors, particularly in areas such as computing power construction, capital expenditure, humanoid robots, solid-state batteries, and semiconductor self-sufficiency [6]. - Attention should also be given to cyclical industries like chemicals and non-ferrous metals, as well as the photovoltaic industry in response to "anti-involution" policies [6].

Core Viewpoint - The convertible bond market presents investment opportunities, driven by supply-demand mismatches and strong underlying stocks, with a positive outlook for the equity market and potential for further exploration of undervalued convertible bonds [1][5]. Group 1: Investment Strategy - Liu Yimin and her team have developed a systematic quantitative investment framework for convertible bonds over three years, focusing on capturing market momentum and identifying quality opportunities through a bottom-up approach [1][2]. - The "Double Low" strategy emphasizes investing in undervalued and low-premium convertible bonds, which are often overlooked by the market, indicating strong upside potential [2][3]. - The team has established three types of quantitative investment strategies: defensive, balanced, and aggressive, tailored to different market conditions, enhancing the portfolio's resilience [3]. Group 2: Market Analysis - The current convertible bond market is experiencing high valuation levels, influenced by strong underlying stocks and a significant increase in demand against a backdrop of reduced supply [5][6]. - Liu Yimin maintains a bullish outlook on the A-share market, anticipating a dual rise in earnings and valuations driven by supportive policies and liquidity [5]. - The approval of convertible bonds has accelerated since November, which could lead to a balanced supply-demand situation, benefiting the long-term stability of the convertible bond market [5]. Group 3: Performance and Adjustments - The fund's investment in convertible bonds accounts for 38.38% of its net asset value, with strong performance metrics over the past year, placing it in the top 10 among similar funds [4]. - The team is currently maintaining a neutral to slightly low position in convertible bonds, focusing on individual bond opportunities while balancing risk [6]. - Continuous monitoring of both technology and traditional sector convertible bonds is essential, especially as policies supporting domestic demand and economic recovery are implemented [6].

Core Viewpoint - The article discusses the investment opportunities in the convertible bond market, highlighting the systematic investment framework developed by Guohai Franklin Fund's fixed income team, led by Liu Yimin, to capture market dynamics and enhance returns through a quantitative approach [1] Group 1: Market Analysis - The convertible bond market is currently in a high volatility range, driven by supply-demand mismatches and the strengthening of underlying stocks, which have elevated convertible bond valuations [1][6] - Liu Yimin maintains an optimistic outlook on the equity market, anticipating a balanced supply-demand scenario as the approval process for convertible bonds accelerates, with further opportunities in technology and undervalued traditional sector convertible bonds [1][6] Group 2: Investment Strategy - The core investment logic of Liu Yimin's team revolves around a "dual low" strategy, focusing on low valuation and low premium convertible bonds that are often underappreciated by the market, thus possessing significant upside potential [2] - The team has developed three distinct quantitative investment strategies: defensive, balanced, and aggressive, tailored to different market conditions, allowing for flexible adjustments based on market dynamics [3] Group 3: Active and Quantitative Approach - The team employs a complementary approach of active selection and quantitative strategies to enhance returns, focusing on fundamental research to identify high-quality convertible bonds, especially in sectors where suitable assets are scarce [4] - Liu Yimin emphasizes a dynamic allocation between active and quantitative strategies based on market conditions, which has led to resilient performance across different market environments [4] Group 4: Performance Metrics - The Guofu Hengjiu Credit Bond Fund, representing the "dual low" strategy, has a significant allocation of 38.38% of its net asset value in convertible bonds as of the end of Q3 [4] - The fund has achieved impressive returns over the past year, with one-year, two-year, and three-year returns of 9.34%, 12.15%, and 14.70%, respectively, ranking in the top 10 among similar funds [5] Group 5: Future Outlook - The convertible bond market is expected to experience a robust supply-demand dynamic, with an increase in approvals for new convertible bonds potentially leading to a stable long-term development of the market [6] - Liu Yimin is closely monitoring the market for opportunities in both technology and traditional sectors, particularly in light of supportive policies aimed at stimulating domestic demand and enhancing performance in the equity market [7]

Core Viewpoint - The article discusses the investment opportunities in the convertible bond market, highlighting the strategies developed by Liu Yimin and her team at Guohai Franklin Fund to capture market dynamics and enhance returns through a systematic quantitative investment framework [1][2][4]. Group 1: Market Analysis - The convertible bond market is currently experiencing a high volatility phase, driven by supply-demand mismatches and strong performance in underlying stocks, which has led to an increase in convertible bond valuations [1][4]. - Liu Yimin expresses optimism about the equity market, anticipating a favorable supply-demand balance as the approval process for convertible bonds accelerates, particularly in technology and undervalued traditional sectors [1][4][5]. Group 2: Investment Strategy - The core investment logic is the "double low" strategy, focusing on low valuation and low premium convertible bonds that are often underappreciated by the market, indicating strong upside potential [1][2]. - The team has developed three types of quantitative investment strategies: defensive, balanced, and aggressive, tailored to different market conditions, enhancing the ability to capture opportunities [2][3]. Group 3: Active and Quantitative Approach - The team combines quantitative strategies with active selection to enhance returns, focusing on fundamental research to identify high-quality convertible bonds, especially in sectors with potential turnaround opportunities [3]. - Liu Yimin emphasizes a flexible approach to the balance between active and quantitative strategies, adjusting based on market conditions to maintain resilience in the portfolio [3]. Group 4: Future Outlook - The convertible bond market is expected to see a robust supply-demand dynamic, with an increase in approvals for new bonds potentially leading to more investment opportunities [4][5]. - The team is closely monitoring the market for both technology-related convertible bonds, which may have high valuations but acceptable profit expectations, and traditional sector bonds that are undervalued and could benefit from policy support [5].

Core Insights - The report addresses key questions regarding the current position of the convertible bond market and the optimal strategies to adopt in this context [4]. - The convertible bond market is currently in a phase of consolidation following a high valuation correction, with risks being released but the cost-effectiveness of allocations still needing improvement [4]. - The premium rate has decreased from a high of 32.49% at the end of August to around 27%, stabilizing around 29% recently, indicating a cooling market [4][5]. - The median of the dual-low value has also dropped from above 170 to a range of 166-168, reflecting similar characteristics to previous market peaks since 2022 [4]. Market Positioning - The current market is not in a high valuation danger zone, nor has it reached a significantly attractive allocation bottom [4]. - The dual-low strategy continues to demonstrate superior risk-return characteristics during this consolidation phase, historically yielding stable excess returns while controlling drawdowns better than high valuation strategies [5]. - In previous market peak phases, such as February 2022 and August 2022, the dual-low strategy outperformed, while high valuation strategies generally underperformed with larger drawdowns [5]. Strategic Recommendations - It is recommended to focus on the dual-low strategy while optimizing execution based on the valuation environment [5]. - Selection of individual bonds should prioritize those with reasonable valuations and sufficient downside protection, adjusting traditional dual-low price screening standards to better fit the current market structure [5]. - Increasing the weight of high-rated bonds in the portfolio is suggested to enhance overall defensive attributes and stability, balancing returns and risks in a volatile market [5].

Report Industry Investment Rating There is no mention of the report industry investment rating in the provided content. Core Viewpoints of the Report - The current convertible bond market is in a stage of shock consolidation after a pullback from high valuations, with risks partially released but the cost - effectiveness of allocation still to be improved. The follow - up market trend depends on the performance of underlying stocks [5]. - During the shock period after the high - valuation pullback, the double - low strategy shows better risk - return characteristics. In the current market stage, it is recommended to focus on the double - low strategy and optimize it according to the valuation environment [5]. Summary by Relevant Catalogs 1. Convertible Bonds Maintain High - level Volatility - The convertible bond market's current hundred - yuan premium rate and double - low value median indicate that it is in a shock consolidation stage after a high - level pullback. The hundred - yuan premium rate dropped from 32.49% at the end of August to around 27% and then stabilized around 29%. The double - low value median is oscillating in the range of 166 - 168 after breaking through 170 [5][6][7]. - The market has cooled down, and short - term bubble risks have been released to some extent, but it has not entered the historically undervalued range. The subsequent market trend depends on whether the underlying stocks can provide support [5][8]. 2. The Double - Low Strategy Dominates Again - By back - testing the performance of various strategies after the high - valuation peaks of the convertible bond market in the past five years, it is found that in most cases, the double - low strategy performs well, with stable positive excess returns and better drawdown control. High - premium strategies such as high - price low - premium, high - liquidity, and high - parity strategies generally underperform and have large drawdowns [11][13][17]. 3. Summary - The convertible bond market is in a shock consolidation stage after a high - valuation pullback. The market has cooled down, but the valuation is still high, and the cost - effectiveness needs to be improved. The follow - up trend depends on the underlying stocks [22]. - It is recommended to focus on the double - low strategy, select individual bonds with reasonable valuations and sufficient downward - revision protection, appropriately raise the price screening criteria of the traditional double - low strategy, and increase the weight of high - rating targets in the portfolio [23].

Summary of Conference Call on Convertible Bond Market Industry Overview - The convertible bond market is currently experiencing high valuations, positioned above the 90th percentile historically, indicating a very expensive market environment [1][2]. Key Insights and Arguments - **Valuation Dynamics**: The high valuation does not necessarily imply poor short-term performance; however, it suggests lower average returns in the long term. Tactical investors may consider exiting, while those seeking short-term gains should wait for additional signals [1][4]. - **Momentum as an Indicator**: Valuation momentum, defined as the current valuation compared to the 5-day moving average, is crucial for assessing market trends. If the current valuation exceeds the 5-day average, it indicates a potential upward trend in the convertible bond market [5][6]. - **High Valuation Implications**: High valuations typically lead to the worst average returns. For allocation-focused investors, this may be a signal to exit, while short-term investors should wait for further indicators before making decisions [4][2]. - **Operational Strategy**: The strategy should focus on reducing turnover rates. In high valuation ranges (80-100), frequent trading is unnecessary, while in low ranges (1-4), adjustments should be made based on factor performance [9][10]. - **Stop-Loss Mechanism**: A stop-loss mechanism should be established, such as exiting positions if valuations drop below the 80th percentile, to mitigate risks during market downturns [9][10]. Additional Important Points - **Double-Low Strategy**: This strategy is effective in avoiding significant drawdowns during market declines. It involves selling during initial downturns and re-entering when the market recovers, particularly in high valuation environments [11][10]. - **Application of Timing Methods**: The timing method can also be applied to equity-focused strategies, although its effectiveness is less pronounced compared to the double-low strategy. The focus should be on convertible bonds with the lowest premium rates, which often have a higher likelihood of strong redemption [12][13]. - **Investment Logic in Current Environment**: In the current market, if valuations are only fluctuating at high levels, infrequent trading is advisable. If trading is necessary, a high-sell-low-buy approach should be adopted, with caution exercised when valuations drop below predetermined thresholds [14][13].

Summary of Conference Call Notes Industry or Company Involved - Focus on convertible bonds and related companies such as 精工钢构 (Jinggong Steel Structure), 有发股份 (Youfa Steel Pipe), 天能重工 (Tianneng Heavy Industry), 华特电子 (Huate Gas), 美景能源 (Meijing Energy), and 福斯特 (Foster). Core Points and Arguments - **Market Sentiment and Convertible Bonds**: Year-end market may see increased risk aversion, necessitating a chip exchange and focusing on buying opportunities at reasonable price points. The convertible bond market shrank in October due to some bonds being delisted and strong redemptions. Institutional allocations are diverging, with insurance reducing allocations and public funds increasing them [1][3][5]. - **Investment Strategies**: Recommended strategies include focusing on convertible bonds priced around 120-130 RMB in high-end manufacturing and those priced around 120-125 RMB with low valuations and improving fundamentals. These latter bonds have lower premium rates and may yield good odds following the third-quarter disclosures [1][6]. - **Company Performance**: - **精工钢构**: Expected revenue of 14.5 billion RMB in Q1-Q3 2025, a 21% YoY increase, with net profit of 589 million RMB, a 24% YoY increase. Anticipated overseas orders exceeding 6 billion RMB in 2025 [1][10][11]. - **有发股份**: Projected profit of 500 million RMB in 2025, benefiting from infrastructure policies and rising demand due to government growth plans [1][12]. - **天能重工**: Expected profit of 10-15 million RMB in 2025, with potential growth to 30-35 million RMB in 2026, driven by the wind power sector's high demand [1][16][17]. - **华特电子**: Revenue from specialty gases constitutes 65% of total revenue, with significant improvements in net profit due to recovering demand from major semiconductor clients [1][15]. - **美景能源**: Focused on coking coal and hydrogen energy, with a significant increase in gross margin and a valuation near historical lows, indicating potential for profit recovery [1][8]. - **福斯特**: Engaged in electronic materials and aluminum-plastic films, with strong growth potential due to collaborations with leading global clients [1][18][20]. Other Important but Possibly Overlooked Content - **Market Dynamics**: The convertible bond valuation is significantly influenced by stock market expectations, with a notable shift in market sentiment leading to a cautious outlook on bond valuations [1][5]. - **Investment in Infrastructure**: The five-year underground pipeline investment plan of 5 trillion RMB is expected to expand downstream demand, benefiting companies like 有发股份 [2][12]. - **Low Valuation Strategy**: In the current market environment, low valuation strategies may offer excess return potential, especially for convertible bonds priced between 80-90 RMB, which show strong investment value [1][9]. - **Future Growth Areas**: Companies are diversifying into high-growth areas such as hydrogen energy and quantum computing, indicating a strategic shift towards innovative sectors [1][8][18]. - **Dividend Policies**: Companies like 精工钢构 are increasing their dividend payout ratios, which may attract income-focused investors [1][11]. This summary encapsulates the key insights from the conference call, highlighting the performance and strategies of various companies within the convertible bond market and related sectors.