Multiple factors drive the deepening trend of indexation in the convertible bond market

Since 2026, the trend of market indexation for convertible bonds has further strengthened. The core indicator of this trend is the significant growth in index products represented by exchange-traded funds (ETFs) based on convertible bond indices. According to Wind Information, the total scale of convertible bond ETFs listed in A-shares has reached 76.667 billion yuan this year, an increase of 81.56% year-on-year.

In my view, this trend is not an isolated phenomenon; an imbalance between supply and demand is the fundamental driving force. Since 2021, the supply side of the A-share convertible bond market has entered a clear contraction phase. On one hand, data shows that the issuance scale of new bonds has fallen from a peak of 282.846 billion yuan in 2021 to 64.823 billion yuan in 2025, indicating a clear supply contraction. On the other hand, the existing market scale continues to shrink due to maturities, forced redemptions, and conversions, leading to a continuous decrease in investable targets. Against the backdrop of tightening supply of high-quality assets and significantly increased difficulty in actively selecting bonds, funds are gradually shifting toward standardized, diversified index products, which has become a rational choice for the market.

The maturity of investor investment habits is a direct driver of the indexation trend. As China’s capital markets continue to improve, investors’ professional literacy and investment awareness are steadily increasing. Investment concepts are accelerating their shift from “simply pursuing returns” to “scientific asset allocation,” with greater emphasis on the intrinsic attributes and suitability of investment tools.

Currently, the unique advantages of convertible bond ETFs precisely meet investors’ core demands—high certainty can effectively reduce investment volatility; high efficiency facilitates quick deployment into the convertible bond market; and low costs lower the barriers for long-term investment. These features make ETFs an ideal tool for investors to allocate convertible bond assets and optimize portfolios, further accelerating the trend of indexation.

Systematic policy guidance is a key external support to strengthen the indexation trend. In January 2025, the China Securities Regulatory Commission issued the “Action Plan for Promoting High-Quality Development of Index Investment in Capital Markets.” This top-level design elevates index investment to a strategic level of high-quality market development, not only conveying clear regulatory guidance but also greatly boosting the confidence of fund managers in developing index products and investors in adopting index tools, laying a solid policy foundation for the indexation of the convertible bond market.

More importantly, policy support is not merely guidance but involves improving the market ecosystem and optimizing the development environment, providing comprehensive nourishment for the sustained growth of index investment.

Specifically, on the product side, efforts are being made to encourage the enrichment and innovation of index systems. In 2025, the China Securities Index Company launched 12 new sector-specific convertible bond indices, providing a variety of benchmark targets for fund managers to develop segmented index products, while better meeting the professional and refined asset allocation needs of institutional investors. On the capital side, policies focus on attracting and stabilizing long-term funds: on one hand, by improving the connectivity mechanisms and continuously expanding the scope of ETFs included in the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect programs, facilitating long-term foreign capital participation in the domestic convertible bond market; on the other hand, by optimizing differentiated arrangements for bond fund redemption fees, guiding funds to establish long-term investment concepts, and encouraging insurance funds and pension funds—highly sensitive to stability, transparency, and costs—to accelerate inflows, providing stable capital support for the trend of market indexation.

In summary, the wave of indexation in the convertible bond market in 2026 is both a natural choice driven by changes in supply and demand, and an inevitable result of the maturing investor structure, as well as a trend guided by top-level policy design. Meanwhile, the evolution of the convertible bond indexation not only reshapes the investment ecosystem of the convertible bond market, reduces market volatility, and improves allocation efficiency but also, with its stability and transparency, provides investors with convenient and efficient asset allocation tools, fostering a more mature and rational investment environment.