Core Viewpoint - The convertible bond market is experiencing significant adjustments, with a notable decline in prices and concerns regarding credit ratings and potential delistings of underlying stocks [1][2][3]. Group 1: Market Performance - As of June 24, out of 533 convertible bonds, 492 have seen a decline, indicating a widespread downturn in the market [2]. - Specific examples include Guanghui Automobile's convertible bonds, which dropped over 30% in three trading days, and Lingnan Shares, whose stock price fell below RMB 1, raising delisting concerns [2]. Group 2: Credit Risk Concerns - The market is increasingly focused on credit risks associated with convertible bonds, particularly the risk of delisting [3][4]. - A number of companies, including Huafeng Shares and Shanying International, have had their convertible bond ratings downgraded due to poor financial performance and failure to meet new customer development expectations [3]. Group 3: Factors Influencing Price Decline - Multiple factors are contributing to the indiscriminate selling of low-priced convertible bonds, including concerns over small-cap stock adjustments, credit rating downgrades, and the risk of delisting for underlying stocks [2][4]. - The tightening of regulations regarding delistings has heightened fears that these risks may extend to the convertible bond market [2]. Group 4: Investment Strategy and Risk Assessment - Investors are advised to conduct thorough risk assessments across various dimensions, including financial indicators and the potential for price adjustments in convertible bonds [6]. - Key indicators to monitor include negative net assets, continuous losses, and low revenue, as well as any inquiries or concerns raised by exchanges or credit rating agencies [6].

Core Viewpoint - The article discusses the recent updates in credit ratings for convertible bonds, highlighting that while most ratings remain unchanged, some have been downgraded due to deteriorating company fundamentals, including losses, increased debt pressure, and worsening credit conditions [1][2]. Summary by Sections Credit Rating Updates - A total of 72 convertible bonds have updated their ratings this year, with 65 bonds maintaining their previous ratings, accounting for 90.28% [1]. - Seven convertible bonds have experienced downgrades, including Dongshi Convertible Bond, Fumiao Convertible Bond, and others, primarily due to continuous losses and increased debt pressure [2]. Specific Cases of Downgrades - Fumiao Convertible Bond's credit rating was adjusted from A+ to A due to the company's declining profitability and rising debt levels, with a significant increase in total liabilities expected by the end of 2024 [2]. - Dongshi Convertible Bond's rating was downgraded from B to CCC, indicating a rise in credit risk for the issuing company [3]. - Puli Pharmaceutical's credit rating was downgraded from BB to B+ following the termination of its stock and convertible bond listings due to significant financial discrepancies [3][4]. Market Impact and Risk Assessment - The overall credit risk exposure in the convertible bond market has influenced investors' risk assessments, although recent market recovery has alleviated some concerns [5]. - Historical data indicates that abnormal exits of convertible bonds are often linked to the issuing company's circumstances, with risks associated with both stock delisting and repayment pressures [5][6].

1. Report Industry Investment Rating - No industry investment rating is provided in the report. 2. Core Viewpoints of the Report - The report conducts a comprehensive analysis of the convertible bond market, issuer financial performance, and credit risk based on the 2024 annual reports and Q1 2025 reports. With convertible bonds entering the peak redemption and repayment period in 2025, the importance of credit risk research has become prominent. Some industries face challenges such as price pressure, demand shortfalls, and supply - demand mismatches, leading to increased operating pressure, weakened profitability, and cash flow issues for some issuers, thus highlighting the need to focus on their credit risks [1][20]. 3. Summary by Relevant Catalogs 3.1 Convertible Bond Market Development Overview - **Issuance and Stock Situation**: In 2024, China's convertible bond issuance scale decreased year - on - year, with a total issuance of 38.757 billion yuan, a 72.78% decline. From January to May 2025, the issuance scale increased compared to the same period in 2024, reaching 25.923 billion yuan, a 156.40% increase. As of June 13, 2025, there were 484 outstanding convertible bonds, with a balance of 668.343 billion yuan. Private enterprises were the main issuers, with 383 convertible bonds and a balance of 388.428 billion yuan. Convertible bonds with lower credit ratings accounted for a relatively high proportion, indicating that some issuers had relatively weak creditworthiness [1][11][12]. - **Importance of Convertible Bond Credit Risk Research**: In recent years, the number of convertible bond credit risk events has increased. Since 2023, credit risk events have occurred in bonds such as Soute Convertible Bond, Hongda Convertible Bond, etc. With convertible bonds entering the peak redemption and repayment period in 2025, the importance of credit risk research has become more prominent [20]. 3.2 Financial Performance of Convertible Bond Issuers - **Profitability**: In 2024, the overall operating income and net profit of convertible bond issuers decreased year - on - year, but showed improvement in Q1 2025. In 2024, industries such as agriculture, forestry, animal husbandry, and fishery turned from losses to profits, while industries like power equipment and building materials saw significant net profit declines. In Q1 2025, industries such as agriculture, forestry, animal husbandry, and fishery continued to perform well, but industries like power equipment and coal had significant net profit declines [23][29]. - **Cash Flow**: In 2024, the overall operating net cash flow of convertible bond issuers decreased year - on - year. Industries such as communication, media, and construction decoration saw significant improvements, while industries like national defense and military industry and power equipment weakened significantly. In Q1 2025, the net outflow of operating cash flow decreased. In 2024, the overall net outflow of investment cash flow decreased, and the net inflow of financing cash flow decreased year - on - year. Industries such as power equipment, electronics, and basic chemicals had large net inflows of financing cash flow and were more dependent on external financing [2][3][49]. - **Debt Burden and Solvency**: At the end of 2024, the overall asset - liability ratio of issuers was 60.93%, an increase of 1.29 percentage points from the end of 2023. The total debt scale increased, and the short - term debt ratio decreased compared to the end of 2023. The overall solvency weakened at the end of 2024 [3]. 3.3 Summary of the Current Credit Risk Status of Outstanding Convertible Bonds - Some industries, including coal, steel, construction materials, and power equipment, face challenges such as price pressure, demand shortfalls, and supply - demand mismatches. Some issuers in these industries have increased operating pressure, weakened profitability, cash flow problems, increased debt burdens, and weakened solvency, requiring close attention to their credit risks [4][63][66].

Core Viewpoint - The article highlights the recent default of Hongda Convertible Bond, indicating a growing trend of credit risk in the convertible bond market, particularly among companies with weak fundamentals [1][2][4]. Group 1: Default Events - On February 25, Hongda Convertible Bond announced it could not repay the principal and interest due to insufficient liquidity, marking another instance of default [1][4]. - The company had previously announced similar defaults in December 2024 and June 2024, citing cash flow issues and large overdue debts [2][5]. Group 2: Company Background - Hongda Convertible Bond, originally known as Hongda Convertible Bond before delisting, was issued in December 2019 with a total scale of 2.427 billion yuan and a six-year term [5]. - The company primarily engaged in the production and sale of chemical products, including polyvinyl chloride (PVC) and caustic soda, and faced significant financial difficulties leading to a 26.07% decline in revenue in 2022 and a further 42.04% drop in the first three quarters of 2023 [5]. Group 3: Market Trends - The article notes a trend of increasing credit risk in the convertible bond market, with several bonds, including Hongda, Suote, and Landun, experiencing defaults [2][7]. - The shift from a historical norm of convertible bonds exiting the market through conversion to a growing concern over repayment risks has been observed since 2020, with multiple instances of defaults and bankruptcies [8]. Group 4: Risk Identification - Investors are advised to monitor key indicators such as revenue, net profit, and cash flow declines, as well as potential non-operational fund occupations by major shareholders, which may signal underlying credit risks [8].