Debt and equities

The hunt for yield: how low interest rates are boosting convertible bond issuance

The description of China’s convertible bond market as a bubble might be overblown, but investors should take care as they look at companies further down the ratings scale.

The market for convertible bonds in China has been growing for the past few years. Chinese companies sold a record Rmb268.2 billion $38.2 million last year, with the country even taking the issuance crown from the US, according to MSCI.

The pace of issuance of the debt instruments that convert to equity is being maintained this year, even if the volume isn’t. The first half of the year saw 56 deals versus 126 deals for the whole of last year which has prompted some observers to warn of bubbles.

Shuncheng Zhang, associate director in Fitch Ratings’ Asia-Pacific corporates team, explains that the volume of convertible...

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