1. Report Industry Investment Rating - No information provided in the given content 2. Core Viewpoints of the Report - In 2026, the "fixed - income asset shortage" and "high equity market sentiment" that drove the convertible bond market in 2025 may continue. The convertible bond market is expected to have a return opportunity of over 10% next year [4]. - The supply - demand structure of the convertible bond market will continue to evolve in 2026, with the term structure becoming "dumbbell - shaped", the "aging" of convertible bonds slowing down slightly, the proportion of funds held in convertible bonds remaining high, and the influence of convertible bond ETFs becoming more prominent [4]. - In 2026, the valuation of convertible bonds is likely to remain high. The market risk appetite is not weak, the convertible bond positions of low - risk - preference investors are at a historical low, and the probability of extreme credit risk events in the short term is limited [4]. - In terms of strategy, attention should be paid to "higher - order" undervaluation. The contradiction between the high demand for undervalued convertible bonds from "fixed - income +" investors with a bond - biased approach and the "weak supply" of traditional low - priced convertible bonds needs to be resolved by constructing more complex undervaluation evaluation criteria [4]. - In the context of the "involution" of clause games, more attention should be paid to the odds. In the high - valuation environment, the valuation of convertible bonds is rapidly compressed before the call - back, and the game space for downward revisions has reached a historical low [4]. 3. Summary According to the Directory 3.1 Convertible Bond "Ecological Niche" Advantage Remains Unchanged, with a Decent Return Space in 2026 - The two factors that drove the convertible bond market in 2025, "fixed - income asset shortage" and "high equity market sentiment", may continue in 2026. As of November 20, 2025, the median parity of the convertible bond market exceeded 100 yuan, and the overall equity nature of convertible bonds was at a historical high. The strong equity market is expected to be the most important support for convertible bonds in 2026 [8]. - The demand for convertible bonds from "fixed - income +" investors, especially bond - biased accounts with stock position limits, is expected to remain high due to the low long - term interest rate environment, which will support the valuation of convertible bonds [8]. - The convertible bond index is expected to have a return space of over 10% in 2026. Based on the delta calculation, if the Shanghai Composite Index reaches 4500 - 5000 points in 2026, the overall return of convertible bonds may be around 8% - 17%, and the actual return space may be higher [8]. 3.2 The "Aging" Speed May Slow Down Slightly, and the Dumbbell Structure Gradually Appears - The contraction speed of the convertible bond market in 2026 is expected to be slightly lower than that in 2025, and the stock size may reach 450 - 500 billion yuan. As of November 21, 2025, the stock size of the convertible bond market was about 550 billion yuan, a decrease of nearly 180 billion yuan from the end of 2024. The net supply of convertible bonds in 2026 may be - 100 billion yuan [13]. - The "aging" of convertible bonds in 2026 may slow down slightly, and the median remaining term of convertible bonds at the end of next year may be about 2.2 years. The main reasons are the redemption of many short - term convertible bonds since 2025 and the recovery of convertible bond supply starting from mid - 2025 [15]. - In 2026, the number of medium - term convertible bonds will significantly decrease, and the term structure will evolve into a "dumbbell - shaped" structure. By the end of 2026, the number of 3 - 4 - year convertible bonds will decline from over 100 at the beginning of the year to about 30. The market may form a structure with medium - and large - sized convertible bonds within 3 years at one end and small - and medium - sized growth technology - related convertible bonds over 4 years at the other end [16]. - In terms of industries, the convertible bonds of non - bank finance, commercial retail, and consumer service industries will all mature by the end of 2026. The non - bank finance industry involves the largest scale and the most targets, with 4 convertible bonds worth 15 billion yuan maturing. The remaining industries' distributions may not change much, and the balance of convertible bonds in the banking, power equipment and new energy, and basic chemical industries significantly leads the others [18]. 3.3 The Proportion of Funds May Further Increase, Pay Attention to Convertible Bond ETFs - As of the end of October 2025, the proportion of convertible bonds held by funds is estimated to reach 47%, the highest level since the data was released. The increase in the proportion of convertible bonds held by public funds is mainly due to the decrease in the scale of convertible bonds held by insurance and annuity funds. By October 2025, the scale of convertible bonds held by insurance may be less than 50 billion yuan, a decrease of nearly 30% from August 2025, and the scale of convertible bonds held by annuities may be close to 130 billion yuan, a record low [20]. - In 2026, the proportion of convertible bonds held by funds is expected to remain high and may even reach a new high. Retail investors have a long - term trend of reducing their holdings of convertible bonds. Insurance and annuity funds may participate in the convertible bond market through FOFs in 2026 due to the low net supply of large - scale and high - rating convertible bonds and the high overall valuation of convertible bonds [22]. - The scale of convertible bond ETFs may continue to expand, and attention should be paid to the potential impact of the high proportion of ETFs on the convertible bond market. As of the end of October 2025, the market value of convertible bonds held by convertible bond ETFs reached 67.84 billion yuan, accounting for nearly 10% of the convertible bond market. The high valuation of newly issued convertible bonds may be related to convertible bond ETFs [27]. 3.4 Valuation is Supported, and There is Room for More Optimism - In 2025, the valuation of convertible bonds increased significantly, and the implied volatility returned to the central level of 2023. As of November 20, 2025, the premium rate per 100 yuan of convertible bonds continued to break through historical highs, and the median implied volatility of convertible bonds exceeded 40% [30]. - In 2026, the valuation of convertible bonds is likely to remain high. The current market risk appetite is not weak, the convertible bond positions of low - risk - preference investors are at a historical low, and the probability of extreme credit risk events in the short term is limited [30]. - The high point of convertible bond valuation may be around 35% - 40%, and considering the possible decline in long - term interest rates and the increase in the bond floor of convertible bonds in 2026, the high point of valuation may be even higher [33]. 3.5 In the High - Valuation Environment, It is Recommended to Focus on "Higher - Order" Undervaluation - In 2025, convertible bond investors clearly preferred undervalued targets. As of November 21, 2025, the return of the low - price strategy was 21.1%, with an excess return of 4.6% compared to the CSI Convertible Bond Index. The relatively "abnormal" excess return may be mainly due to institutional behavior [37]. - In 2026, it may be more difficult for the pure low - price strategy to obtain excess returns. The market is facing the contradiction between the high demand for undervalued convertible bonds from "fixed - income +" investors with a bond - biased approach and the "weak supply" of traditional low - priced convertible bonds. It is recommended to focus on "higher - order" undervaluation [41]. - The convexity strategy may be a good entry point for "higher - order undervaluation". Since 2025, the series of convexity strategies have achieved excellent results, with a Calmar ratio of over 3 and a return of over 20% [42]. 3.6 The "Involution" of Clause Games, and More Attention Should Be Paid to the Odds - In the fourth quarter of 2025, the experience of convertible bond clause games was not good. In the high - level volatile environment of the equity market, listed companies became more cautious in considering convertible bond clauses. As of November 21, 2025, only 1 convertible bond proposed a downward revision in that month, and the ratio of downward - revision announcements to possible downward - revision announcements was 0.04:1, both the lowest levels since March 2023. The ratio of call - back announcements to non - call - back announcements in November was 1.57:1, the highest level in 2025 [45]. - In the high - valuation environment, the convertible bond call - back game has become "involution". The difference in the average conversion premium rate of convertible bonds with a call - back progress of 80% - 100% and those with a progress of 0 - 20% has rapidly expanded since September 2025, and the conversion premium rate of convertible bonds with a high call - back progress has fallen to a historical low [47]. - The game space for convertible bond downward revisions is narrowing. Under the dual influence of high valuation and institutional preference for undervalued convertible bonds, the average difference between the prices of all convertible bonds eligible for downward revision and the expected price after a full downward revision has narrowed to a relatively low level since 2021 [48]. - The report also lists the convertible bonds whose cooling - off periods for downward revisions and call - backs will end in 2026 [52][53][54].