Policy spring breeze "brings warmth" as the enthusiasm for convertible bond issuance rises

On April 7, the Dr. Bond (convertible bond) debuted and surged 43% on its first trading day. The impressive listing performance reflects strong market sentiment. Recently, the supply side for convertible bonds has also been showing positive signals: the number of convertible bond issuance plan announcements disclosed by listed companies has jumped, with both the intended issuance quantity and intended issuance size increasing.

Experts say that the implementation of the new rules on refinancing is the main driver for the rise in convertible bond plans. The policy provides more precise easing for science-and-technology innovation firms, simplifies approval procedures, and—combined with strong demand for technology-industry financing—has significantly improved firms’ willingness to raise funds. In addition, the issuance pace for new offerings has clearly accelerated, and convertible bond supply over the course of this year is expected to recover modestly.

More convertible bond issuance proposals

Data from Wind shows that as of April 7, this year, 23 listed companies have published convertible bond issuance proposals, with a total intended issuance size of 32.93B yuan. Among the convertible bond issuance proposals disclosed by the 23 listed companies, Zhongke Shuguang, Chinagro (C?—Chuang? actually “中创智领”), and STO Express plan issuance sizes of no more than 8 billion yuan, 4.35 billion yuan, and 3 billion yuan, respectively.

On February 9, the Shanghai and Shenzhen and Beijing stock exchanges issued new rules on refinancing, aiming to further improve flexibility and convenience in refinancing and better serve the development of technological innovation and new-quality productive forces.

Zhai Tiantian, deputy general manager of the research and development department at Oriental Jincheng, said in an interview with China Securities Journal that the reasons for the clearly increased number of newly proposed convertible bond plans are: first, the upturn in the business conditions of the technology industry has improved firms’ financing needs, and the expansion plans of relevant companies have significantly repaired their financing willingness; second, the new refinancing rules optimize the refinancing environment for technology firms. They not only ease financing constraints on profitability and the “issue-under-performance” (“破发”) outcome for science-and-technology innovation companies, but also send a positive signal that the capital market will strengthen support for the new-quality productive forces sector, improving companies’ initiative to raise funds.

“This round of refinancing package optimization measures is, after two years of strict supervision, under the premise that the overall framework of ‘favor the better and limit the worse, and strengthen supervision’ remains unchanged, to provide structural easing for high-quality entities and science-and-technology innovation entities, and to open up targeted channels at the tool level.” Zuo Dayong, chief fixed-income analyst at Industrial Securities, said. On the one hand, the measures significantly shorten the financing interval and relax restrictions on the replenishment of working capital for unprofitable science-and-technology innovation firms and light-asset, high-R&D-investment firms. On the other hand, they reopen refinancing channels for “issue-under-performance” firms that had previously been effectively blocked. Combined with process simplification and cost reduction, this makes it likely that the supply of convertible bonds in the medium and long term can achieve a modest recovery.

The intended uses of proceeds from convertible bond issuance also reflect the “favor the better and limit the worse” orientation of the new refinancing rules. Zhongke Shuguang said that funds raised through the issuance of convertible bonds will be used for projects such as an advanced computing power cluster system for artificial intelligence and a next-generation high-performance AI training and inference integrated machine project. Chuangzhi Ling said that the funds are intended to be used for projects such as a new energy vehicle high-end automotive parts industrial base project and a smart mobile robot manufacturing base project.

“As of April 7, among convertible bond proposals first released this year, the proportion of specialty, refined, unique, and new (专精特新) or hard-technology firms on the Science and Technology Innovation Board accounts for 52.17%, up 7.73 percentage points from the same period last year,” Zhai Tiantian said.

New issues may accelerate

With the issuance process speeding up, the primary market for convertible bonds is expected to replenish “fresh blood.”

Zhou Guannan, chief fixed-income analyst at Huachuang Securities, said that considering factors including the recent acceleration of convertible bond approvals, the probability of the stoppage and non-implementation, the probability of completing listings within the year, and the scale of pending proposals awaiting issuance, the expected convertible bond issuance size for this year is 91.66 billion yuan.

However, industry insiders analyze that, under the impact of the new refinancing rules, although convertible bond issuance is expected to gradually expand, the trend of shrinking the scale of the existing convertible bond market is difficult to mitigate in the short term.

Zhai Tiantian said that although a series of positive changes have appeared in the新增供给 for convertible bonds, under the backdrop of an approaching maturity peak and strong willingness among stock-like instruments to force early redemption, the difficulty of stopping the decline and achieving a rebound in the market size of convertible bonds remains significant.

Zhai Tiantian also analyzed that from the exit side, the convertible bond maturity amount in 2026 will be 85.58B yuan. For old convertible bonds with strong stock-like characteristics (remaining time to maturity less than 2 years), the willingness to force early redemption is stronger. It is expected that the scale of forced early redemption exits of convertible bonds this year could be above 90 billion yuan, from which it can be inferred that the total exit volume of convertible bonds this year will exceed 170 billion yuan. From the supply side, although the pace of regulatory reviews has clearly quickened, the expected time for the sequence from the warmth in the publication of convertible bond proposals to a substantive rebound in actual convertible bond issuance is about 6 to 9 months for it to become clearly evident. In addition, currently, the scale of convertible bond proposals that have not yet completed issuance is generally small.

“Overall, it is expected that the scale of newly issued convertible bonds in 2026 will be around one trillion yuan, and the decline in the market’s existing convertible bond scale will be clearly narrower than in 2025,” Zhai Tiantian said.