HSBC Global Research was not surprised that China's Internet industry is utilizing the bond market to enhance shareholder returns, HSBC Global Research issued a research report saying. Given the current higher interest rate environment, convertible bonds (CB) can provide a better choice for external financing over direct bonds .
Depending on the credit quality of the issuer, 5-year bond yields in the sector were between 5.2% and 5.9%. Of which, JD-SW (09618.HK) -3.000 (-2.273%) Short selling $289.46M; Ratio 13.194% 's current convertible senior debt was issued with an annual coupon rate of 0.25%.
JD-SW's current CB issuance will enable it to take advantage of lower financing costs to accelerate its share buyback process at the current share price, HSBC Global Research said. The Group also plans to buy back more than the potential future dilution.
However, based on the historical share price performance of other internet companies following CB issuances, this move could lower investor sentiment and limit JD-SW's share price in the short term.
From an equity perspective, HSBC Global Research continued to prefer MEITUAN-W (03690.HK) -0.800 (-0.659%) Short selling $363.93M; Ratio 15.368% , TENCENT (00700.HK) +0.800 (+0.209%) Short selling $943.46M; Ratio 11.016% , NTES-S (09999.HK) -4.900 (-3.091%) Short selling $146.43M; Ratio 15.312% and PDD, all of which are rated at Buy, taking into account the companies' fundamentals, growth outlook and defensiveness against competition.
However, HSBC Global Research believed that MEITUAN-W and TENCENT are among the best for a CB offerings. Therefore, their share price sentiment may be affected in the near term.
(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2024-05-22 16:25.)
