Morning Commentary: Pinduoduo, iQIYI convertible notes in focus as bloodbath continues

By Abigail W. Adams

Portland, Me., July 26 – The convertible notes of China-based companies continued to dominate the tape as the bloodbath in their equities continued.

Pinduoduo Inc.’s 0% convertible notes due 2025 and iQIYI Inc.’s 3.75% convertible notes due 2023 were in focus early Monday.

The convertible notes continued their downward spiral as investors fled the equities of China-based companies as Beijing ramped up its regulatory crackdown on the private sector.

Pinduoduo’s 0% convertible notes traded as low as 91 early in the session but pared its losses on an outright basis as the Shanghai-based e-commerce platform’s American Depositary Shares traded off their lows.

The 0% notes were changing hands at 93 versus an equity price of $94.87 early in the session.

There was about $11 million on the tape.

Pinduoduo’s ADSs traded as low as $87.35 after the opening bell but gained ground as the session progressed and was changing hands at $92.15, a decrease of 5.32%, shortly before 11 a.m. ET.

iQIYI’s 3.75% convertible notes traded down to 96.5 versus an equity price of $10.49 early in the session.

There was about $10 million of the bonds on the tape.

The Beijing-based online entertainment service provider’s ADSs were volatile early Monday.

They traded as low as $10.44 but bounced off their lows and briefly entered into positive territory before once again turning negative.

The ADSs were changing hands at $11.12, a decrease of 1.68%, shortly before 11 a.m. ET.

There was panic selling in the equities of China-based corporations as Beijing amped its regulatory crackdown.

China officially released new regulations for its for-profit education companies over the weekend, which forces them to transform into non-profits and bars them from raising capital or going public.

Market chatter about the new regulations triggered what one source called a “bloodbath” in China-based equities and convertible notes on Friday.

The new regulations come amid an escalation of tensions between the United States and China after a high-level meeting between diplomats over the weekend was reported to have ended in a stalemate.

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