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szdaily -> Markets -> 
Traders wrestle with 1-in-5,500 odds to chase stocks
    2019-03-14  08:53    Shenzhen Daily

SHUT out of a world-beating rally in equities, China’s fixed income investors are chasing the next closest thing.

The battle for equity-like returns is driving up interest in the country’s nascent convertible bond market. Showing just how coveted the securities have become, an offering from Citic Bank this month saw orders outstrip supply by 5,500 times. Issuers have raised US$13 billion from the debt this year, surpassing the value of initial public offerings more than four times over.

That’s because fixed-income investors — restricted by their mandates — are struggling to match the performance of funds that are allowed to buy into China’s stock rally. The Shanghai Composite Index is up 21 percent since January, putting equity investors on track for their best quarterly return since 2014. That compares with a 3.2 percent gain for a gauge tracking credit, and 14 percent for convertible bonds.

“It’s a good time to buy convertibles,” said Tuo Zhongliang, an investment manager at Cinda Securities Ltd. “Returns will be much higher than traditional fixed-income products in the medium to long-term.”

The next big test of investor appetite is Bank of Communications Co.’s planned 60 billion yuan convertible issue, which could be the largest such offering China’s domestic market has ever seen. Ping An Bank Co.’s 26 billion yuan (US$3.8 billion) sale in February was about 1,400 times oversubscribed.

(SD-Agencies)

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