A 57.3% maximum price gain has become the standard performance for new convertible bonds on their first trading day this year.
According to Wind data, since the beginning of 2026, all new convertible bonds have closed at their maximum allowable price gain on their debut, with some issues continuing to rise subsequently, making convertible bonds one of the hottest sectors in the capital market since the start of the year.
Experts interviewed stated that ample macro liquidity, combined with the continuous expansion of "fixed-income plus" products and thematic convertible bond funds, has created substantial demand for investment targets that offer both safety and return potential. Convertible bonds have become a key allocation focus due to their unique characteristics. The sustained maximum gains of new issues are not driven by a single factor but result from the multi-dimensional resonance of capital flows, underlying stock performance, supply-demand dynamics, and market sentiment: the robust fundamentals of the underlying stocks' sectors provide solid support, tight market supply-demand balance amplifies the capital allocation effect, and rising market sentiment further fuels short-term capital concentration, collectively driving the strong performance of new issues.
The secondary market has seen a clear shift towards index-dominated patterns.
Trading in convertible bonds has remained highly active throughout the year.
On one hand, all newly listed convertible bonds this year have closed at 157.30 yuan on their first trading day, with many maintaining upward momentum afterward. For instance, Naipu Convertible 02, which listed on January 30, surged 30% at opening triggering a temporary trading halt, before reaching the full 57.3% gain after resumption, completing this year's "standard trajectory" for new issues. Lianrui Convertible Bond, listed on January 28, hit the maximum gain on its debut and surged another 20% the next day, accumulating over 126% gains within three trading days.
On the other hand, capital flows have shown concentration, with convertible bond ETFs becoming the core entry point for allocations and bringing major incremental funds to the secondary market. Data shows that convertible bond ETFs have attracted net inflows of 13.193 billion yuan year-to-date, with Bosera CSI Convertible & Exchangeable Bond ETF accounting for 10.592 billion yuan, representing over 80% of total ETF net inflows. Haitong Shanghai SSE Investment Grade Convertible Bond ETF attracted 2.600 billion yuan, highlighting significant capital concentration toward leading ETFs.
Notably, this trend began emerging in late 2025 when the total scale of convertible bond ETFs reached 61 billion yuan, surpassing the 58.1 billion yuan scale of actively managed convertible bond funds for the first time, marking index-based investing as the mainstream allocation method in the secondary market and shifting institutional demand from active security selection to tool-based allocation.
Zhai Tiantian, an analyst at Oriental Jincheng Research and Development Department, stated that convertible bonds are expected to continue tracking their underlying stocks' volatile consolidation in the near term, maintaining fast-rotating structural patterns where high-crowding sectors face increased vulnerability, while large-cap and dividend convertible bonds are likely to remain favorable amid rising defensive allocation demand. However, convertible bonds still possess asymmetric advantages during wide fluctuations. After earnings forecast disclosures conclude, risk aversion toward small and micro-cap stocks is expected to gradually ease. Combined with the current ample liquidity environment, a new market uptrend could potentially emerge before the Spring Festival, with market style likely shifting back toward small-cap dominance, thereby driving the convertible bond market.
The sustained fervor in the secondary market for convertible bonds is closely linked to structural changes in the primary market.
From the perspective of Zhang Yue, Chairman of Aoyou International, the gradual exit of existing convertible bonds due to maturity and forced redemption, coupled with slow new issuance pace and concentration in high-quality sectors, has made investable targets increasingly scarce. This scarcity, combined with reduced supply of low-price bonds, has further pushed up overall premium rates for convertible bonds.
Data shows that as of February 3, the total issuance amount of convertible bonds year-to-date reached 5.780 billion yuan, an increase of 3.095 billion yuan compared to 2.685 billion yuan during the same period last year. When factoring in forced redemptions, the market still shows net contraction overall. As of February 3, the outstanding balance of the convertible bond market was 551.337 billion yuan, a slight increase of 1.027 billion yuan from the beginning of the year, with the number of outstanding issues remaining at 400.
Specifically, 13 convertible bonds have triggered forced redemption clauses year-to-date, involving issuers such as Fuliewang Precision Electromechanical (China) Co., Ltd., Zhejiang Huazheng New Material Co., Ltd., and Shenzhen Songsheng Electronics Co., Ltd. Bonds including Xingfa Convertible Bond, Tianjian Convertible Bond, and Shentong Convertible Bond have entered the redemption process. The exit of existing convertible bonds directly offsets the scale increase from new issuances, further highlighting the scarcity of remaining market targets.
Zhai Tiantian analyzed that the equity market's volatile upward trend this year, driven by sustained strength in small and micro-cap stocks, has pushed underlying stock prices higher, causing more convertible bonds to reach forced redemption trigger conditions and significantly increasing the number of bonds triggering clauses this year. Simultaneously, the "aging" characteristic of the convertible bond market has become more pronounced. The average remaining maturity of bonds currently triggering forced redemption continues to narrow. Limited conversion time windows ahead have also strengthened issuers' overall willingness to complete bond exits through forced redemption after triggers are met.
Notably, from the perspective of new issuance structure, targets with scientific and technological innovation attributes have become the core new增量 in this year's primary market. Data shows that among convertible bonds issued this year, those in sci-tech innovation sectors account for over 45% of total issuance scale, covering segments such as semiconductor equipment, new energy materials, and high-end equipment manufacturing, highly aligned with capital markets' key supported hard technology fields.
"The substantial gains of new issues after listing reflect optimistic future expectations," Zhang Yue stated. Particularly, new issues concentrate in technological innovation, new materials, and high-end manufacturing sectors—industries supported by industrial policies with clear growth prospects, for which the market grants higher valuation tolerance. This has become one reason for the strong demand for new convertible bond issues this year.
Comments