On Chinese Convertible Bonds And Current Environment And Developing Trends Of Their Creation

Nowadays, the convertible bonds have become the worldwide financial products. However, comparing with other financial instruments exiting in our economic market, the convertible bonds could only be regarded as complementarity due to their short history and limited market. The research on convertible bonds owns a short history and the study on the option conversion price is definitely rare under Chinese special financial environment and trade terms. While, the research concerning the new products of convertible bonds issued by corporation with equity warrants bonds (WBs) is much more seldom.This article focuses on the deep analysis on the convertible bonds in the economic market of China, summarizes reasons of listed corporation preferring convertible bonds financing, analyzes the main problems of the convertible bonds exiting in Chinese very financial environment and trading system and meanwhile points out that both improvement of the trading amount and the creation in the terms and conditions of the bonds are necessary for presenting the value of the convertible bonds market.This article selects the case of HUA LING convertible bonds which issued in 2003 and makes a clearly analysis on the problems faced by our convertible bonds market. It is also fingered out that in order to design the terms and conditions of the convertible bonds the initial conversion premium and the growing ability of the industry and corporations should be contacted with each other, how to make use of the relationship between the credit grading should be considered and the interests rate and designing of the terms and conditions of the convertible bonds could be created through marketing interests, considering the benefits of the common shareholders, protecting the benefits of bondholders and constraining the rights of adjusting down the conversion price.In consideration of how to set up a reasonable interests rate for the corporations'WBs in the secondary market of China, it is hold in this article, the correspondinginvestors need to bear some loss in the earnings due to the WBs. The factors influencing the loss in earnings and the acceptable interests rate in the market could be measured through comparing the trial calculation of the cost and the rate difference between the common bonds and WBs. Besides, through comparing the differences between the two kinds of financing and the issuing condition of the bonds with attached warrant among USA, Europe and Asia areas, it could be observed that the preference of the market influences the price level of the bonds.Basing on the absorption of experiences in the abroad market system and developing environment, the design of the bonds with attached warrant has been discussed and the risky factors of the WBs have been analyzed at the same time. The abroad experience and the current economic trends of China indicate that the popularity of the WBs means a lot and it could improve the attraction of the debenture so that the marketable and sequenced financing could be realized and the convertible bond could be improved. Meanwhile, due to the exiting risks of the WBs, such as credit, interests rate, share price, liquidity etc, and under the special financial environment of China, WBs still own the cognizance and operation risks. Upon these problems, some solutions have been proposed from the writer's point of view.Bonds with attached warrant are one special kind of the convertible bonds. The characters, developing environment and the difficulties in the market of China faced by this creative products have been analyzed in this article and the direction of designing the common convertible bonds in China has also been pointed out.