Report Title - Focus on Convertible Bond Equity Characteristics and Seize Structural Opportunities: Convertible Bond Strategy for Q4 [1] Report Industry Investment Rating - Not provided Core Views - Q4 2025 may be the quarter with the strongest equity characteristics of convertible bonds since 2017. Equity characteristics are likely to be one of the most important factors determining convertible bond returns in Q4. Attention should be paid to technology - related catalysts and the implementation of the 15th Five - Year Plan. There are still structural opportunities, especially bond downward revisions. Additionally, clues can be found from convexity, undervaluation, and debt resolution. The pressure to take profits is expected to bottom out, and there is still room for valuation to rise [2]. Summary by Directory 1. Q4 Convertible Bond Outlook: Focus on Equity Characteristics and Seize Structural Opportunities 1.1 In Q4, the Key to Convertible Bonds Lies in Equity Characteristics - Due to institutional behavior, the equity characteristics of convertible bonds may be at a historically strong level. As of the end of Q3 2025, the overall parity level of convertible bonds was at a historical high, the YTM levels of overall/partial - debt convertible bonds were at almost historical lows, and the median delta of convertible bonds was at a historical high. For "fixed - income +" investors, equity characteristics have become the primary investment attribute. From the perspective of return decomposition, the contribution ratio of equity/valuation returns in Q4 may exceed 4:1 [6][8]. 1.2 Pay Attention to Potential Opportunities Brought by Technology Catalysts and the 15th Five - Year Plan - In Q4, the industrial track may remain active. There are many leading technology - sector targets among new bonds that have recently or may be listed in Q4, such as Maolai Optics and Weidao Nano in the photolithography semiconductor concept. The "technology content" of the convertible bond market may continue to increase. Looking forward to the 15th Five - Year Plan, concepts such as new - quality productivity, green and low - carbon, and anti - involution in industries may bring new industrial opportunities, and convertible bonds in the new energy direction are worthy of long - term attention [13]. 1.3 Beyond Equity Characteristics, There Are Still Structural Opportunities. Pay Attention to Terms, Convexity, Undervaluation, and Debt Resolution - In terms of terms, downward revisions are particularly worthy of attention. 47 convertible bonds will end their downward - revision cooling periods in October 2025. Six convertible bonds with a scale of over 2 billion yuan are about to start downward - revision counting. In terms of convertible bond quantification, the convexity and undervaluation strategies have performed well since 2025, and it is expected that they will have a high probability of generating stable excess returns in Q4. In the context of aging convertible bonds and strong equity sentiment, 2025 is expected to be a big year for debt resolution. It is recommended to allocate debt - resolution targets in the early and middle stages when funds are at a low level [15][17][19]. 2. Valuation: The Probability of Valuation Compression Is Low, and There May Still Be 3% - 5% Upside Space - The pressure for insurance funds to take profits on convertible bonds in Q4 may decrease, and the probability of valuation compression is low. The insurance convertible bond position has reached a historically low level, and the cycle of insurance funds reducing their convertible bond holdings that started in September 2024 may be approaching the end. Implied volatility is an important reference factor for specific valuation points. The three important thresholds for the 100 - yuan premium rate in Q4 may be 26%, 31%, and 34%, with an upside space of about 5% [21][23]. 3. Risk: The Risk of Near - Maturity Convertible Bonds Is Small, and Market Risk Appetite May Be Stable - It is expected that there will be 10 convertible bonds maturing in Q4, with a total scale of about 30 billion yuan. From three perspectives, the probability of substantial credit risk in the convertible bond market in Q4 is small: the unrestricted monetary funds of these convertible bonds in H1 2025 can cover the bond balances; convertible bonds with low parity are actively resolving debts; and the credit rating results in 2025 are the best in recent years [25]. 4. Supply: Faster Approval Cannot Offset the Delisting Speed, and the Market May Continue to Shrink - The approval speed of new convertible bonds has significantly accelerated recently. However, the delisting speed of convertible bonds is faster. By the end of Q4, the convertible bond market size may decrease to about 550 billion yuan. As of September 30, 2025, 21 convertible bonds have announced early redemptions, with a total scale of 3.129 billion yuan. There are 10 convertible bonds maturing at the end of the year, with a total scale of 31.196 billion yuan. There are also 53 convertible bonds that have triggered the early - redemption price and are in the counting period, with a total scale of 65.285 billion yuan [27][31]. 5. Capital Behavior: Pay Attention to Potential Style Drifts of Convertible Bond ETFs - After excluding early - redeemed and near - maturity convertible bonds, the market - value contribution of power equipment by Boshi Convertible Bond ETF will exceed that of bank convertible bonds. Similarly, for Haifutong Shanghai Stock Exchange Convertible Bond ETF, the proportion of bank convertible bonds' market - value contribution will significantly decrease after excluding relevant bonds. Overall, power equipment and electronics have the largest increase in total market - value contribution [35][40][43].