Core Viewpoint - The bank convertible bond market is experiencing a significant contraction in supply, driven by strong performance in bank stocks, leading to a reduction in the total balance of bank convertible bonds from nearly 300 billion yuan at the peak in 2023 to approximately 150 billion yuan currently [1][2]. Group 1: Market Dynamics - The total balance of bank convertible bonds is expected to shrink by at least 100 billion yuan this year due to the early redemption of several bonds and the lack of new issuances [2][3]. - As of July 14, 2023, the market share of bank convertible bonds has decreased from a peak of approximately 38.97% to about 22.64% [2][7]. - The strong performance of bank stocks, with the bank sector index reaching a historical high, has triggered the early redemption of several convertible bonds [5][10]. Group 2: Institutional Response - Institutions are beginning to shift their asset allocation strategies in response to the rapid loss of quality assets in the bank convertible bond market, with some moving towards high-rated convertible bonds in non-bank financials and public utilities [1][11]. - The average allocation of convertible bonds in various asset management products has reached around 78%, indicating a sustained interest despite the market's contraction [9]. - Institutions are actively seeking alternative investment opportunities, focusing on high-rated, low-volatility convertible bonds as replacements for bank convertible bonds [12]. Group 3: Future Outlook - The ongoing contraction in the bank convertible bond market may lead to increased difficulty in selecting suitable bonds, prompting some investors to exit the market [10]. - The focus on non-bank financial and public utility sectors is expected to grow, as these sectors are perceived to have lower credit risk and potential benefits from improved equity risk preferences [12]. - The potential for a "Davis double" effect, where both stock price increases and valuation improvements occur, is seen as a favorable scenario for convertible bonds in the current market environment [10].

Report Industry Investment Rating No relevant content provided. Core Viewpoints - The balance of bank convertible bonds may shrink by approximately 10 billion yuan this year, and by the end of 2025, it may be around 9 billion yuan. If other commercial banks can follow the example of state - owned banks' low - PB private placements, there may be a possibility of supplementary supply of bank convertible bonds [3][4]. - The replacement bottom - position varieties should have the characteristics of high rating, low volatility, and high capital capacity. It is recommended to pay attention to AAA - rated convertible bonds in non - banking finance and general public utilities for low - volatility and high - rating, and photovoltaic equipment and pig - breeding convertible bonds for large capital capacity [3][40]. - For photovoltaic equipment convertible bonds, it is recommended to screen leading individual bonds and leave room for rating downgrades. When the convertible bond price is low, gradually build a position [2][22]. Summary by Relevant Catalogs 1. The balance of bank convertible bonds may shrink by about 10 billion yuan this year - As of June 30, 2025, there were 10 bank convertible bonds in the market, with a balance of 13.49 billion yuan, a decrease of 7 bonds and 11.1 billion yuan compared with the end of 2023. If the relevant convertible bonds are all delisted, the balance of bank convertible bonds will further shrink by 10.13 billion yuan to 8.98 billion yuan by the end of 2025 compared with the end of 2024 [4]. - The shrinkage of bank convertible bond scale may be irreversible in the short term. It is necessary to observe the progress of bank capital replenishment. Currently, the policy supports state - owned large - scale banks to replenish core tier - one capital. This year, the private placement prices of four state - owned big banks were lower than 1 - time PB, about 0.7 - time PB. There are bank convertible bonds totaling 2.9 billion yuan that have been announced but not issued, and the current PB multiples of the underlying stocks are between 0.5 - 0.7 times [4]. 2. The replacement bottom - position varieties should have three characteristics: high rating, low volatility, and high capital capacity - Before 2024, bank convertible bonds mainly served as bottom - position allocation varieties, with limited contribution to returns. Since 2024, due to the strengthening of the dividend style, bank convertible bonds have advantages in both returns and volatility. After bank convertible bonds exit the market, investors may return to the pre - 2024 investment model, and the difficulty of participation has increased. Some investors may leave the convertible bond market [13]. - The replacement bottom - position varieties should have high rating, low volatility, and high capital capacity. Configuration is the primary function, and individual bond elastic returns are a by - product [13]. 3. Low - volatility and high - rating: AAA - rated convertible bonds in non - banking finance and general public utilities - As of June 30, there were 4 non - banking finance convertible bonds, with 3 AAA - rated ones having a total scale of 1.46 billion yuan. They belong to the same large - finance industry as bank convertible bonds, with low risks of underlying stock delisting and credit default. After a sharp rise, it is not recommended to chase the high. When the convertible bond price returns to around 110 - 115 yuan, it may be a good bottom - position allocation buying point [17]. - The so - called "general public utilities" include public utilities and transportation. There are 3 AAA - rated convertible bonds in this sector, with a balance of 1 billion yuan. The advantage is a long remaining term, and the disadvantage is a relatively high current convertible bond price and insufficient defense against underlying stock decline [18][20]. 4. Large capital capacity: Photovoltaic equipment and pig - breeding convertible bonds - Photovoltaic equipment and pig - breeding are both strong - cycle industries. The current balance of photovoltaic equipment convertible bonds is 6.08 billion yuan, and the balance of pig - breeding convertible bonds is 2.72 billion yuan. The photovoltaic equipment sector's net profit turned negative in 2024, and the pig - breeding sector may have passed the most difficult period, but the pig price has been falling since August 2024 [21]. - The advantages of photovoltaic equipment convertible bonds are low prices and high capital accommodation. It is recommended to screen leading individual bonds and leave room for rating downgrades. The advantage of pig - breeding convertible bonds is mainly large capital capacity, and it is necessary to pay attention to the marginal changes in the pig price [22].