Report Overview - Report Title: "How to View Photovoltaic Convertible Bonds under the Background of 'Anti-Involution' - Convertible Bond Weekly Report 20250712" - Report Type: Fixed Income Asset Allocation | Comment Report - Report Date: 2025-07-16 1. Report Industry Investment Rating The document does not mention the industry investment rating. 2. Report's Core View - From July 7 to July 12, 2025, the convertible bond market continued its mild recovery, with increased trading activity. Medium - sized and convertible bonds with expected elasticity performed relatively well. The equity market was highly differentiated, with low - valuation and cyclical manufacturing sectors becoming the main investment directions [2][6]. - The photovoltaic equipment sector has low market attention and congestion. Photovoltaic convertible bonds have cost - effective valuations. Driven by the "anti - involution" policy, the industry's fundamentals are expected to recover, and the holdings of active equity funds may gradually increase [2][6]. - The valuation of the convertible bond market is differentiated by the parity range. The low - parity range shows significant differentiation, while the valuation of the high - parity range has increased. The implied volatility has declined, and the market sentiment is cautious [2][6]. - The primary market supply of convertible bonds is steadily released, and the clause game shows intensified differences. It is recommended to focus on the layout opportunities in the low - valuation and high - safety - margin directions, taking into account the rhythm and rotation [2][6]. 3. Summary by Relevant Catalogs 3.1 Market Weekly Review - **Photovoltaic Equipment Sector**: The market attention and capital participation of the photovoltaic equipment sector are at a relatively low historical level. The allocation ratio of active funds has significantly decreased, and the turnover and trading volume are weak. There are signs of chip clearing, and the congestion is at a relatively low historical level. Under the "anti - involution" policy, the supply - side clearing is expected to repair the fundamentals. Photovoltaic convertible bonds have strong bond - bottom returns and valuation advantages, showing valuation repair and risk - return matching [9]. - **A - share Market**: The A - share market continued to rise in shock, with obvious style differentiation. Funds were concentrated on low - valuation and cyclical manufacturing sectors. The real estate, steel and other sectors led the gains, and the trading activity increased significantly, reflecting the strengthened expectation of valuation repair. There was increased differentiation within the growth direction, with some sectors maintaining high popularity and others experiencing a decline in trading. The trading rhythm of the market accelerated, and the rotation characteristics were enhanced [9]. - **Convertible Bond Market**: The convertible bond market continued to rise moderately, with increased trading activity. Medium - sized convertible bonds performed well, and the style slightly inclined to elastic varieties. The valuation of the convertible bond market showed a differentiated trend according to the parity range. The implied volatility fluctuated and declined, and the sentiment became more cautious. In terms of industries, the financial and pharmaceutical sectors attracted capital inflows, and the cyclical sectors were relatively strong [9]. - **Primary Market of Convertible Bonds**: The primary market of convertible bonds maintained a stable rhythm. One convertible bond was open for subscription, two new bonds were listed, and five companies updated their issuance plans. The issuance momentum is expected to continue to be steadily released. In terms of clause games, there were no proposals for downward revisions, and some bonds clearly stated not to revise downward. Multiple varieties announced forced redemptions, and some promised not to redeem in advance [9]. 3.2 Market Theme Weekly Review - **Equity Theme**: The A - share market continued its structural differentiation, with increased short - term trading activity. Gaming funds continued to concentrate on high - elasticity directions, and the financial technology theme was strong. The new energy sector was highly differentiated, and the digital economy showed a structural recovery. The overall market trading sentiment was high, and the theme rotation accelerated [24]. - **Convertible Bond Theme**: The convertible bond market continued to rise, with the increase rate moderately narrowing. The trading activity reached a recent high, and medium - sized convertible bonds performed better. The valuation of the convertible bond market was differentiated by the parity and market price ranges. The implied volatility declined, and the market sentiment was slightly cautious. The non - banking, coal, and pharmaceutical sectors led the gains, and the trading volume was concentrated in the pharmaceutical and biochemical sectors [27]. 3.3 Market Weekly Tracking - **Main Stock Indexes**: The main A - share stock indexes continued to strengthen, with small and medium - sized and science - innovation stocks performing prominently. The market capital showed a net outflow, but the scale of the net outflow decreased, indicating a marginal improvement in market sentiment [29][30]. - **Industry Performance**: The A - share market showed a structural market dominated by low - valuation sectors. The real estate sector led the gains, followed by the steel, comprehensive, and non - banking financial sectors. The automobile sector led the decline, and some previous hot sectors faced correction pressure. The market capital was concentrated on low - valuation cyclical sectors and also considered structural opportunities in the growth track [34]. - **Convertible Bond Market**: The convertible bond market continued to rise, with the increase rate moderately narrowing. Medium - sized convertible bonds performed better, and the trading activity reached a recent high. The valuation of the convertible bond market was differentiated by the parity and market price ranges. The implied volatility declined, and the market sentiment was slightly cautious. The non - banking, coal, and social service sectors led the gains, and the pharmaceutical, basic chemical, and power equipment sectors had the highest trading volume [45][55]. 3.4 Primary Market Tracking and Clause Game - **New Bond Issuance**: One convertible bond was open for subscription (Guanghe Convertible Bond), and two new bonds were listed (Huachen Convertible Bond and Luwei Convertible Bond). Five listed companies updated their convertible bond issuance plans, including three accepted by the exchange and two approved by the general meeting of shareholders [66][67]. - **Clause Game**: There were no proposals for downward revisions of convertible bonds during the week, and some bonds clearly stated not to revise downward. Multiple varieties announced forced redemptions, and some promised not to redeem in advance. There were 3 convertible bonds that announced they were expected to trigger downward revisions, 13 that announced no downward revisions, 2 that announced they were expected to trigger redemptions, 3 that announced no early redemptions, and 4 that announced early redemptions [75][80].

Report Industry Investment Rating There is no information provided in the report regarding the industry investment rating. Core View The report analyzes the situation of bank convertible bonds shrinking in the convertible bond market and explores possible bottom - position allocation ideas for convertible bond funds and other types of funds after the reduction of bank convertible bonds as large - cap bottom - position varieties. It provides suggestions for investors on how to choose bottom - position varieties based on the characteristics of convertible bond bottom - position varieties and market conditions [13]. Summary by Relevant Catalogs 1. Convertible Bond Bottom - Position Variety Overview - Pan - fixed - income + funds have a certain demand for convertible bonds. Convertible bond funds have an average convertible bond position of about 78%, and the convertible bond positions of first/second - level bond funds, balanced hybrid, and partial - debt hybrid funds are mostly maintained above 10% [1][15]. - At the industry level, public funds generally use convertible bonds from industries such as banks and power equipment as bottom - position varieties. Bank convertible bonds account for a large proportion in the convertible bond bottom - position varieties of public funds at all times, but the bottom - position varieties change with factors such as bond balance and market conditions [19][21]. 2. Overview of Bank Convertible Bonds - the "Major Holders" of Convertible Bond Bottom - Positions - **Purpose of Issuance**: Issuing convertible bonds is an important way for commercial banks to supplement core tier - 1 capital, and they need to achieve this through continuous conversion. Some bank convertible bonds have seen large shareholders convert at a premium to seize the opportunity to supplement core tier - 1 capital [2][28]. - **Characteristics**: Bank convertible bonds have high safety, can be pledged, and have high dividend yields of underlying stocks, almost no default risk, and strong anti - risk ability. They are also an important income - enhancement channel for stable accounts [2][33]. - **Scale Trend**: In recent years, there have been few bank convertible bond issuances, but the delisting rhythm has accelerated significantly. There are currently no new bank convertible bond issuances in the short term, and there are no new bank convertible bond pre - plans after the refinancing regulations [40][43]. 3. How to Allocate Subsequent Bottom - Position Varieties? - **Characteristics of Convertible Bond Bottom - Position Varieties**: Most bottom - position varieties have high ratings (AA and above), large market values (nearly 90% have a convertible bond balance of over 2 billion), and good anti - decline performance [3][46]. - **Analysis of "Possible Bottom - Position Varieties"**: - **Substituting with Other High - Rating Large - Cap Varieties**: Such as photovoltaic convertible bonds. Although there are relatively limited eligible targets, and photovoltaic convertible bonds have been increasingly favored by funds in recent quarters, whether each high - rating large - cap bond can be used as a bottom - position still needs comprehensive consideration [52][56]. - **Comparing with Public Fund Benchmarks**: Considering currently under - allocated varieties. However, in practice, most public funds' performance benchmarks do not contain convertible bond - related indices, and the conversion premium rate may be a significant interference factor [57][62]. - **Idea for Bottom - Position Selection**: - **For Convertible Bond Funds**: Consider individual bonds with a positive YTM and good credit quality of underlying stocks. Also, construct a convertible bond portfolio with low or negative correlations among some individual bonds [66][67]. - **For Non - Convertible Bond Funds**: When it is difficult to find suitable bottom - position varieties in the convertible bond market, consider switching to other types of bonds [71][72].