SZSE observes trading of convertible bonds and warns investors about trading risks

2 mins read

The FINANCIAL — The convertible bond market was active recently, with drastic price fluctuations. The trading prices of some convertible bonds seriously deviated from their companies’ stock prices. By the close of trading on October 23, four convertible bonds on SZSE recorded a conversion premium of over 150%, among which, Henghe Convertible Bond (123013) had the highest conversion premium, 236.80%. Because convertible bonds have debt, equity and convertible features at the same time, holders can convert bonds into common stocks according to the price and time agreed upon the issuance of convertible bonds. There is a positive correlation between the trading prices of convertible bonds and company stock prices. When there is a substantial deviation in the prices, there will be a big valuation risk for the convertible bonds. Investors should be on high alert and invest with rationality.

SZSE carefully conducted regulation of trading of convertible bonds and strictly prevented trading risk. First, SZSE strengthened real-time intraday monitoring, with a focus on convertible bonds with abnormal ups and downs, and promptly adopted regulatory measures against abnormal transactions. Second, SZSE enhanced verification of trading of convertible bonds and reported suspected violations to China Securities Regulatory Commission (CSRC) in a timely manner. Third, SZSE deepened connection between transaction regulation and information disclosure regulation, actively paid attention and promptly made inquiries, urged listed companies to disclose relevant information and improved market transparency. Fourth, SZSE intensified the efforts to make public the regulatory information, releasing the list of convertible bonds under key monitoring to the market via the weekly monitoring information bulletin.

Next, SZSE will continue to deepen the implementation of the principles of “building systems, no intervention and zero tolerance”, do well in transaction regulation, strengthen joint regulation of transaction and information disclosure, and improve systems for trading of convertible bonds including temporary delistings, to effectively forestall market risks, practically maintain the market transaction order and fully protect investors’ legitimate rights and interests. SZSE advises investors to develop risk awareness, conduct trading with rationality and according to laws, and not to participate in speculation blindly so as to mitigate unnecessary losses.

Leave a Reply