Core Viewpoint - The convertible bond market in China has entered a technical bull market, with the China Convertible Bond Index reaching a new high of 439.86 points on June 25, marking a cumulative increase of over 20% since September of the previous year [1][4][2]. Market Performance - The China Convertible Bond Index has shown a strong upward trend, reaching its highest level since June 26, 2015 [2]. - The convertible bond market has benefited from a supportive policy environment and a strong performance in the A-share market since September 24 of the previous year, which has boosted investor confidence [4][5]. Supply and Demand Dynamics - The convertible bond market is experiencing a shrinking supply, leading to increased scarcity and heightened demand from investors [1][4]. - Despite concerns over credit risk and defaults in the first half of 2024, the overall risk has significantly decreased, allowing for a recovery in investor confidence and capital inflow into the convertible bond market [5][6]. Fund Performance - Convertible bond funds have performed well, with several funds achieving year-to-date returns exceeding 8% as of June 24 [5]. - The scale of convertible bond ETFs has increased significantly, with the Bosera China Convertible Bond ETF reaching over 400 billion yuan, a fivefold increase from the beginning of 2024 [5][6]. Investor Behavior - Investors are exhibiting a tendency to take profits amid the strong performance of the convertible bond market, reflecting a rational approach to risk management [6][7]. - The current high valuation of the convertible bond market, with a median conversion premium rate close to 30%, raises concerns about potential price corrections if underlying stock prices fluctuate [8]. Future Outlook - The future performance of the convertible bond market may increasingly depend on the performance of underlying stocks, as high conversion premiums could lead to significant risks if stock prices decline [8][9]. - The ongoing supply contraction in the convertible bond market may lead to increased difficulty in selecting bonds, potentially reducing the market's attractiveness and liquidity [9].