1. Report's Industry Investment Rating - Not provided in the given content 2. Core Viewpoints of the Report - The valuation stratification of convertible bonds has loosened. Last week, the average premium rate of high - parity bonds continued to decline, and the valuation of low - parity debt - biased bonds also adjusted slightly. The market valuation stratification remains obvious, with the average premium rate of convertible bonds with a parity of over 110 at the 87% quantile since 2024, that of bonds with a parity between 80 - 110 at the 92% quantile, and that of bonds with a parity between 70 - 80 above the 95% quantile. The performance of high - price and low - price indexes also reflects this stratification. The high - price index's YTD return has dropped to 3.1% from its peak, while the low - price index still has a 4.08% YTD return, leading among various indexes and experiencing small recent drawdowns. The difference in returns and valuation stratification imply investors' current participation mentality. High - volatility and high - parity bonds are the first to be cashed out when the equity market fluctuates and there are call - back disturbances, and they are also the best offensive tools in an upward market. In contrast, relatively low - price debt - biased bonds are more resilient in market fluctuations and are currently “reluctantly sold” by the market. From the capital aspect, convertible bond ETFs have been the largest marginal pricing funds since the beginning of the year, but they turned to net outflows last week. Currently, the implied volatility of convertible bonds significantly exceeds the historical volatility of the corresponding underlying stocks, and the underlying stocks have been in a volatility - decreasing trend since September 2025. The convertible bond valuation structure is still fragile after short - term adjustments. If the Iran - US conflict continues to exceed expectations, it may lead to a further adjustment in the A - share market. If the profitable funds flowing into convertible bonds this year turn into losses, it may form a negative feedback loop in capital flow, and the loosened valuation may decline further [2]. 3. Summaries According to Relevant Catalogs 3.1 Valuation Stratification after Loosening - Due to the recent re - pricing of call - back provisions and the large number of bonds meeting the call - back conditions, high - price bonds have been collectively adjusted. Last week, the average premium rate of high - parity bonds continued to decline, with the average conversion premium rate of bonds with a parity of over 130 compressing from 14.3% to 12.8%, returning to the level in November 2025. Different from previous weeks, the valuation of debt - biased bonds also loosened, with a significant decline in the premium rate of the debt - biased part. The valuation stratification is significant, with the average premium rate of convertible bonds with a parity of over 110 at the 87% quantile since 2024, that of bonds with a parity between 80 - 110 at the 92% quantile, and that of bonds with a parity between 70 - 80 above the 95% quantile [10][11]. - The performance difference between different indexes since the beginning of the year is obvious. The YTD return of the CSI Convertible Bond Index is 3.4%. The YTD return of the high - price index has dropped to 3.1% from its peak, while the low - price index still has a 4.08% YTD return, leading among various indexes. High - price convertible bonds feature high volatility, high drawdown, and relatively low returns, while low - price convertible bonds show low volatility, low drawdown, and relatively high returns at present [15]. - The difference in returns and valuation stratification imply investors' current participation mentality. High - volatility and high - parity bonds are the first to be cashed out when the equity market fluctuates and there are call - back disturbances, and they are also the best offensive tools in an upward market. In contrast, relatively low - price debt - biased bonds are more resilient in market fluctuations and are currently “reluctantly sold” by the market. Convertible bond ETFs have been the largest marginal inflow and pricing funds since the beginning of the year. The net inflow of two convertible bond ETFs once reached 20 billion yuan, becoming the main driver for the valuation increase of convertible bonds this round. As of now, the scale of the two convertible bond ETFs exceeds 75 billion yuan, accounting for 11% of the convertible bond market. However, they turned to net outflows last week. Since March, the Iran - US geopolitical conflict has continuously exceeded market expectations, leading to a significant increase in the VIX index and oil price volatility. The main A - share indexes have also declined since March, and high - risk - appetite assets represented by the technology sector have been significantly adjusted. So far, the YTD returns of various convertible bond indexes are still above 3%, and the funds flowing in since the beginning of the year are still in a floating - profit state. The implied volatility of convertible bonds is 46%, significantly exceeding the 42% historical volatility of the corresponding underlying stocks in the past 250 trading days, and the ratio is still at 110%, in a historically high range. The underlying stocks have been in a volatility - decreasing trend since September 2025, and the convertible bond valuation structure is still fragile. If the Iran - US conflict continues to exceed expectations, it may lead to a further adjustment in the A - share market, which will drive the parity of convertible bonds to adjust. If the profitable funds flowing into convertible bonds this year turn into losses, it may form a negative feedback loop in capital flow, leading to an accelerated adjustment of convertible bonds [17][22][25]. 3.2 Market Review 3.2.1 Equity Market: Volatile Adjustment - Last week, the Shanghai Composite Index and the ChiNext Index changed by - 0.70% and 2.51% respectively. Affected by the continuous overseas geopolitical conflict, the indexes continued to adjust, with significant differentiation among sectors. In terms of style, affected by the Iran - US geopolitical conflict exceeding expectations, the expectation of coal chemical industry replacing petrochemical industry emerged, so the coal sector continued to rise sharply, while the petrochemical sector fell sharply. The basic chemical sector continued to rise due to the expectation of an increase in industrial chain prices. At the same time, driven by the logic of power shortage and computing power coordination, the public utilities, power equipment, and building decoration sectors rose sharply. The national defense and military industry and media sectors led the decline [28]. - Index valuations continued to decline. The market first rose and then fell last week, but still ended lower overall, and valuations also declined. The PE (TTM) of all A - shares was 18.39X, down from the previous period, at the 67% quantile of the historical valuation level since 2005. The PE (TTM) of the ChiNext was 45.27X, continuing to decline, at the 49.4% quantile of the historical valuation level since 2009. Valuations among sectors were highly differentiated, but the overall level was not low. Affected by geopolitical factors, there was significant differentiation among sectors last week. The valuations of the leading coal, power equipment, and building decoration sectors increased by 1.6X, 0.01X, and 0.46X respectively, while the valuations of the lagging national defense and military industry, petrochemical, and non - ferrous metal sectors decreased by 9.57X, 0.29X, and 1.45X respectively. The valuation of the electronics sector has reached a historical high, and the valuations of other sectors such as computers, automobiles, and the military industry are above the historical median. There are also many sectors whose valuations are still close to the historical median. Only the valuations of sectors such as agriculture, forestry, animal husbandry, fishery, household appliances, food and beverages, and building decoration, which are more related to consumption and real estate, are still around the 10% quantile of history. The market valuation differentiation has converged but is still large, and the overall valuation level is not low [30][34]. 3.2.2 Convertible Bond Market: Valuation Continued to Adjust - Last week, the CSI Convertible Bond Index closed at 508.67, down 1.1%, with a decline comparable to that of major stock indexes. In terms of trading volume, the average daily trading volume was 69.051 billion yuan, down 5.47% from the previous period, and trading volume declined slightly. Among individual bonds, Haitian (42.33%), Wankai (19.63%), and Baichuan Zhuan 2 (16.2%) led the gains, belonging to the environmental protection, basic chemical, and basic chemical sectors respectively. Haitian was a newly - listed bond, and Hebang was a repair of the premium rate after the announcement of no early call - back. The rest followed the performance of the underlying stocks. Fenggong (- 18.67%), Yong 22 (- 18.14%), and Zhenhua (- 17.61%) led the losses, belonging to the machinery equipment, basic chemical, and basic chemical sectors respectively. Yong 22 and Fenggong announced early call - backs, driving the adjustment, and the rest followed the adjustment of the underlying stocks [36]. - Valuations continued to decline. The conversion premium rate (arithmetic average) of convertible bonds with a parity between 90 - 110 was 36.5%, slightly compressed from the previous week. The valuation of current balanced convertible bonds is above the 98% quantile of history. The average YTM of convertible bonds with a parity below 80 was - 3.0%, recovering slightly from before but still at a historical low. In terms of absolute prices, as of last Friday, the median closing price of convertible bonds was 138.3 yuan, above the 95% quantile since 2020, falling another 2 yuan from the previous week. The proportion of convertible bonds with an absolute price below 120 was only 7.5%, and has been within 10% since the beginning of the year [39]. 3.3 Clause Tracking 3.3.1 Call - Back Clause - Last week, 9 individual bonds announced early call - backs, namely Saili Convertible Bond, Yong 22 Convertible Bond, Baichuan Zhuan 2, Zhongchong Zhuan 2, Guangli Convertible Bond, Hongqiang Convertible Bond, Fenggong Convertible Bond, Weice Convertible Bond, and Liyang Convertible Bond. In addition, 6 individual bonds have not announced the last trading day and the last conversion day. Last week, 4 individual bonds announced no early call - backs, namely Titan, Yubang, Weidao, and Hebang. Only Titan was a renewal of the no - early - call - back announcement, and the rest were first announcements. This week, the following convertible bonds are expected to meet the early call - back conditions and announce, among which those with a premium rate still above 15% are Fuchun, Huayuan, Sanjiao, and Jinji [44][45][46]. 3.3.2 Downward Revision Clause - Last week, 1 convertible bond proposed a downward revision, which was Weining. 3 convertible bonds announced the dates of no downward revision, which were Like, Shengtai, and Kehua. Among them, Kehua will not have a downward revision before maturity, and the other two have a 6 - month no - downward - revision cooling - off period. This week, 5 individual bonds are expected to meet the downward - revision conditions, namely Guanyu, Sanfang, Jiete, Ruike, and Fulai [48][49][50]. 3.4 Primary Market - There was no new bond issuance last week. One company issued a convertible bond issuance plan, which was Zhongke Environmental Protection (1 billion yuan). Two companies' convertible bond issuances were accepted by the exchange, which were Qianhong Pharmaceutical (1 billion yuan) and Tianshan Electronics (697.02 million yuan). One company's convertible bond issuance passed the approval of the issuance review committee, which was Diweier (907.71 million yuan). One company obtained the approval and reply from the CSRC, which was Star Semiconductor (1.5 billion yuan) [50][51].

Group 1: Report Industry Investment Rating - No information provided on the industry investment rating in the report Group 2: Core Views of the Report - The current self - adjustment of convertible bonds is not over, with weakened ability to follow the rise, and the valuation actively declines when the underlying stock pulls back. In the current market, the cost - performance of convertible bonds is low, but considering the slow - bull market of A - shares, there is no need to be overly worried. Now is a concentrated point for convertible bond realization, and high - price, low - premium equity - like varieties and defensive individual bonds are more worthy of consideration, such as some bottom - position varieties represented by banks [6][9]. - Backtesting on recent years' forced redemption cases shows that there are objective returns and a certain degree of certainty in gambling on forced redemption clauses. The number of subsequent forced redemptions and waived forced redemptions is still considerable and worthy of attention [6][9]. - The equity market showed a trend of rising first and then falling last week, with sector differentiation. The Shanghai Composite Index almost broke through the 3900 mark at the beginning of the week and then adjusted significantly. The short - term index needs to oscillate and adjust, but the view of a positive long - term index trend remains unchanged. Attention should be paid to the press conference of the State Council Information Office next Monday [6][9]. Group 3: Summary According to the Catalog 1. Convertible Bond Views: Valuation Continues to Compress, Waiting for the Entry Opportunity - The self - adjustment of convertible bonds is ongoing, with weakened follow - up ability and active valuation decline. The current cost - performance of convertible bonds is low, but there's no need for excessive worry. High - price, low - premium equity - like varieties and defensive individual bonds are recommended. The equity market had a volatile week, and the long - term trend of the index is still positive [6][9]. 2. Convertible Bond Review: Convertible Bonds Follow the Decline Again, Valuation Continues to Fall 2.1 Market Overall Performance: Equity Rises First and Then Falls, Technology Remains the Main Line - From September 15th to September 19th, market index performance was differentiated. The Shanghai Composite Index fell 1.30%, the Shenzhen Component Index rose 1.14%, the CSI 300 fell 0.44%, the CSI 1000 rose 0.21%, the ChiNext Index rose 2.34%, the STAR 50 rose 1.84%, and the Beijing Stock Exchange 50 fell 1.43%. In terms of industries, coal, power equipment, and electronics led the rise, while banks, non - ferrous metals, and non - bank finance led the decline. The average daily trading volume increased by 1922.4 billion yuan to 2.52 trillion yuan. The top ten rising convertible bonds last week were Jingxing, Hengshuai, Songsheng, etc., and Jingxing, Jing 23, Liyang, etc. were more active in trading [13]. 2.2 Valuation Actively Compresses, High - Price, Medium - and Low - Rated Convertible Bonds Perform Well - Last week, convertible bonds pulled back again, with active valuation compression. The average daily trading volume increased significantly to 818.02 billion yuan. The CSI Convertible Bond Index fell 1.55%, the parity center decreased by 1.1% to 111.1 yuan, and the conversion premium rate center decreased by 1.1% to 18.9%. In terms of style, high - price, medium - and low - rated convertible bonds performed well last week, while AA + rated and large - cap convertible bonds performed weakly [6][18]

Core Viewpoint - The convertible bond market has shown significant activity, with a notable increase in trading volume and interest from investors due to its unique characteristics that combine both bond and stock attributes [1][2]. Market Activity - In May, the trading volume of convertible bonds exceeded 1.37 trillion yuan, and in the first eight trading days of June, the total trading volume reached 702.19 billion yuan, averaging 87.77 billion yuan per day [1][2]. - As of June 13, the total outstanding convertible bonds amounted to 797.77 billion yuan, a decrease of 73.02 billion yuan since the beginning of the year [2]. - The average price of convertible bonds in the market was 121.99 yuan, with an average conversion premium rate of 70.75%, and 99 convertible bonds had a conversion premium rate exceeding 100% [2]. Performance Analysis - The CSI Convertible Bond Index has increased by 1.65% this year, while the Shanghai Composite Index has risen by 1.81% [2]. - The top ten active convertible bonds have seen an average daily trading volume of 2.81 billion yuan, with their underlying stocks averaging a gain of over 30% [3]. Future Outlook - Analysts predict that the convertible bond market will continue to expand in the second half of the year, driven by decreasing opportunity costs and favorable supply-demand dynamics [3][4]. - The focus for investors should be on high-quality companies and sectors with strong growth potential, including state-owned enterprises and industries related to emerging technologies [3][4]. Selection Criteria - Investors are advised to consider various factors when selecting convertible bonds, including stock market style, sector performance, and the underlying stock's financial metrics such as gross margin and return on assets [4]. - The importance of understanding redemption clauses, particularly conditional redemption, is emphasized, as 17 convertible bonds have undergone strong redemption this year [5].