(Yicai) Sept. 6 -- A convertible bond issued by Wankai New Materials, a leading Chinese supplier of polyester chips for plastic bottles, sank 6.3 percent on its first day of trading in Shenzhen yesterday, making it the first this year to drop below par value on its debut.

Wankai Convertible Bond [SHE: 123247] closed 1.8 percent lower today at CNY92.03 (USD12.99). It ended yesterday at CNY93.69 (USD13).

Wankai raised CNY2.7 billion (USD381.2 million) in the bond sale, funds which will go to build the first phase of a 600,000-ton ethylene glycol factory and to supplement working capital, the Jiaxing-based company said.

China International Capital Corporation and Citic Securities underwrote the offering, with CICC guaranteeing any amounts that fall below the subscription amount.

The bonds can be converted into a predetermined number of Wankai’s stock. Based on the initial conversion price of CNY11.45 (USD1.62) per share, that corresponds to about 236 million shares, or 46 percent of the total share capital.

Convertible bonds are debt securities that can be changed into shares of the issuing company under certain conditions. They offer investors a balance between the fixed returns of bonds and the potential upside of stocks, but they are sensitive to stock price movements, as the conversion feature is tied to the issuer's share price.

If Wankai’s stock price tumbles to less than 85 percent of the conversion price, or below CNY9.73, for 15 out of 30 consecutive trading days, it will trigger a conversion price adjustment clause.

Wankai ’s shares [SHE: 301216] sank 3.1 percent to CNY9.64 (USD1.40) apiece in Shenzhen today, giving the company a market capitalization of about CNY5.1 billion (USD720 million). The stock fell 0.5 percent yesterday.

Far fewer convertible bonds have been issued in China in the second half of this year compared with the same time last year, and their average first-day gains have been less impressive.

Sixteen such bonds were listed between July 1 and Sept. 5 and they rose by an average of 29 percent on their debut, according to data from financial information platform Wind. A year earlier, 46 were listed and managed an average increase of around 38 percent.

Editor: Kim Taylor