On May 28th, the Schroders Global Investment Management (Hong Kong) Content Team released an article stating that convertible bonds have the characteristics of stability and sustained growth. They not only provide investors with protection in the financial markets but also have growth potential. They are not just another investment option, but can also protect investment portfolios and accelerate capital appreciation. In addition, Schroders Global Investment mentioned that convertible bonds may become an attractive and stable asset in investment portfolios. Schroders Global Investment stated that while the popularity of convertible bonds is not as widespread as traditional corporate bonds, their history dates back hundreds of years. Convertible bonds were first issued in the 19th century by canal and railway companies in the UK and US to finance their latest projects. In recent years, the popularity of convertible bonds has been on the rise. Due to the hybrid nature of these securities, which combine some characteristics of both bonds and stocks and have low correlation with other assets, they are expected to perform well in investment portfolios. Compared to stock or bond investments, convertible bonds stand out in their response to financial market conditions. While no investment is without risks, convertible bonds can provide a certain degree of protection in a declining market, while also benefiting from market upturns. Schroders Global Investment introduced that a standard convertible bond is a corporate bond that pays interest and includes an option that allows the holder to convert a portion of the bond into the issuer's stock within a specified period. At maturity, the value of the convertible bond is either the redemption price of the bond (if the holder does not convert it into stock) or the market value of the converted stock. There are several reasons why investors may convert convertible bonds into stocks, including fluctuations in stock prices, consideration of dividends, financial market conditions, and the investor's views on voting rights and businesses' operating strategies. In addition to this standard structure, convertible bonds can also include other features that allow the issuing company to buy back the bonds before maturity. This is usually done at a predetermined price or by giving investors the right to sell the bonds back to the issuer at a specific price before maturity. Essentially, these features provide greater flexibility for both the issuer and the holder. Schroders Global Investment stated that since convertible bonds have stock-like characteristics, their value increases when the relevant stock price rises. Similarly, when the stock price falls, the value of the convertible bond also decreases, but not to the same extent as the stock because the bond portion provides support. In addition, convertible bonds act as a safety net in volatile financial markets because they establish a floor price for the bond. As long as the issuing company of the convertible bonds continues to fulfill its debt obligations, the value of the convertible bonds will be at least equal to the bond's floor price, regardless of how much the stock price falls. In this scenario, convertible bonds function like regular bonds, providing capital protection to investors. Furthermore, since most convertible bonds are unsecured senior bonds, convertible bonds rank higher in the capital structure compared to other bonds and stocks. In the event of bankruptcy, convertible bondholders are prioritized over lower-ranked securities investors, providing additional capital protection. Compared to traditional bonds, convertible bonds are less sensitive to rising interest rates. This is largely due to the shorter maturity of convertible bonds (usually three to five years) and the embedded stock options, which are often more sensitive to rising interest rates, providing a compensating mechanism. The stock options embedded in convertible bonds provide protection when financial market volatility increases, as the value of stock options also increases as market volatility rises. In terms of returns, since convertible bonds provide interest payments, they offer a stable income source, making them more attractive to investors seeking growth and income. The interest rates on convertible bonds are usually lower than those of standard bonds issued by the same issuer, reflecting their potential for stock price growth. However, for investors who value the income, capital appreciation potential, and downside protection provided by convertible bonds, these features are generally acceptable. The unique nature of convertible bonds provides investors with a "best of both worlds" investment choice, allowing them to invest in stocks while being protected by the bond's floor price (providing downside protection and income while being sensitive to the rise of the equity portion). Therefore, for investors who want to benefit from the potential growth of stocks but wish to take a relatively conservative stance, while also seeking interest income, convertible bonds are an ideal alternative choice. They may become attractive and stable assets in investment portfolios.