Big Chinese companies are turning to the convertible bond market as a way of raising cheap cash from US hedge funds while circumventing investor concerns about political tensions between the two countries. Traditional US equity fundraising routes such as initial public offerings and follow-on share sales have been almost completely shut to Chinese companies since the disastrous listing of rideshare group Didi in 2021, which delisted the following year after regulatory scrutiny.
” Many hedge funds withdrew from the convertibles market after suffering large losses in the 2008 financial crisis when prices tumbled. But they have become more active in recent years, after issuance surged during the coronavirus pandemic when interest rates were cut to ultra-low levels. Convertible arbitrage funds have gained 5.1 per cent so far this year, according to data group HFR, after making 4.8 per cent last year.