(Yicai) Aug. 7 -- As the Chinese stock market strengthens, nearly 72 percent of the convertible bonds delisted from the Chinese market this year were mandatory conversions, triggered by high share prices.

Of the 71 convertible bonds that were delisted from the Chinese mainland market this year as of yesterday, 51 were forced conversions, according to statistics compiled by Yicai. The remaining 20 were delisted for having reached maturity or for the delisting of the underlying stocks.

The latest companies to announce the mandatory conversion of their bonds were Qilu Bank, Zhuzhou Feilu High-Tech Materials, and Zhangjiagang Guangda Special Material yesterday.

In the Chinese mainland market, mandatory conversions are triggered when the closing price of convertible bonds’ underlying stocks is above 130 percent of the conversion price for at least 15 trading days within 30 consecutive trading days. If this happens, investors must convert their bonds at the predetermined ratio.

The main reason behind the increase in mandatory bond conversions is the rise in Chinese stock prices this year. The average year-to-date price jump across Chinese mainland-listed stocks as of yesterday was 26 percent, according to Wind data.

Less than 30 convertible bonds have been issued this year. This, plus the accelerated triggering of mandatory bond conversions, has created an imbalance in the convertible bond market.

Demand for convertible bonds strengthened, while supply shrank, which has caused a shortage of alternative large-scale high-quality products for institutions, a fixed-income analyst told Yicai. As a result, it has become more and more difficult for institutions to acquire such assets.

The imbalance between supply and demand in the Chinese convertible bond market has directly pushed up the valuation of the remaining convertible bonds available, placing the overall market value at a relatively high level, the analyst noted.

The scarcity of convertible bond issuance is expected to become more pronounced in the second half of the year, making convertible bond investments increasingly challenging, the analyst predicted.

Editor: Futura Costaglione