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在线翻译:
szdaily -> Markets -> 
Bulls set to get more ways to bet on stocks
    2017-03-07  08:53    Shenzhen Daily

    CHINA bulls are set to get more tools to bet on equity gains as the nation’s top underwriter of convertible bonds forecasts more sales.

    China International Capital Corp. (CICC), which has arranged US$7.7 billion in convertible notes onshore and offshore in the past seven years, said issuance may at least double in 2017. While China’s stock regulator last month put restrictions on additional share sales by companies to crack down on excessive fundraising, there was no curb on offerings of convertible debt.

    That’s stoked speculation for an increase in offerings of the notes that can be exchanged for equity, which for onshore yuan securities amounted to only 0.3 percent of all local corporate bonds issued in 2016. An average coupon rate of 0.6 percent on new domestic convertibles last year is encouraging borrowers, compared with the 3.71 percent on regular notes.

    The securities also let investors bet on Chinese stocks while receiving interest, at a time when Morgan Stanley is forecasting a 37 percent increase in the Shanghai Composite Index to 4,400 this year.

    “We are cautiously optimistic about the stock market,” said Deng Xinyu, a fund manager at Bosera Asset Management Co., which oversees 625 billion yuan (US$90.5 billion). “There are bigger opportunities to get excess returns in convertible bonds than regular bonds.”

    Convertible bonds have rebounded this year in market trading as equities creep higher. Guangzhou Automobile Group Co.’s 0.5 percent convertible note due 2022 has climbed to 119 yuan from 116 yuan at the end of last year, while Sany Heavy Industry Co.’s 0.5 percent security due 2022 rose to 112 yuan from 110 yuan, according to exchange data.

    The China Securities Regulatory Commission said in February that company boards need to wait at least 18 months to offer more shares after raising capital via equities. Meanwhile, issuance of company notes dropped to a three-year low in the first two months of this year after yields surged. Those factors are prompting firms to consider selling exchangeable debt.

    “Convertible bonds are the first option as a substitute for private placed shares,” said Liu Qingchuan, Beijing-based head of bond origination at CICC, who is in charge of debt underwriting at the brokerage. “Following the government’s share sale curbs, we plan to expand the convertible bond business. More non-financial companies will raise financing through convertible bond sales.”

    Tianfeng Securities Co. said onshore convertible sales may jump to around 100 billion yuan this year. Chinese firms issued 29.6 billion yuan in such notes in 2016. Regulators will step up support after reining in share sales and will shorten the approval process, which now takes about three to five months, analysts led by Sun Binbin at Tianfeng Securities wrote in a research note Tuesday last week.

    The onshore market has been slow to develop. Chinese firms sold US$9.2 billion in convertible bonds last year, half of which were issued onshore. In contrast, U.S. firms issued US$27.1 billion in such notes in 2016.

    Convertible bonds could help borrowers improve their balance sheets, according to CICC’s Liu. Debt levels in some industries remain high even following the government’s deleveraging efforts. China listed real estate companies’ total debt was 86 percent of common equity, compared with the ratio of 47 percent for all property firms listed in Asia Pacific.

    “The conversion of bonds into stocks would help companies lower their debt-to-asset ratio and help banks replenish capital,” said Liu. “Even if there is no conversion, coupon rates on convertible bonds are lower than regular bonds.” (SD-Agencies)

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