China bulls set to get more ways to bet on stock surge

SHANGHAI: China's top underwriter of convertible bonds said there is “sub stantial“ scope for sales to grow this year as regulators curb secondary share offerings, providing investors with more options for betting on the nation's rising equity market.

China International Capital Corp which has arranged $7.7 billion of con vertible notes onshore and offshore in the past seven years, said issuance may at least double in 2017. While China's stock regulator last month put restrictions on additional share sales by companies to crack down on excessive fund raising, there was no curb on offerings of convertible debt.

That's stoked speculation for an increase in offerings of the notes that can be exchanged for equity, which for onshore yuan securities amounted to only 0.3% of all local corporate bonds issued in 2016.

An average coupon rate of 0.6% on new domestic convertibles last year is encouraging borrowers, compared with the 3.71% on regular notes.

The securities also let investors bet on Chinese stocks while receiving interest, at a time when Morgan Stanley is forecasting a 37% increase in the Shanghai Composite Index to 4,400 this year.