Recent rally increases the chance for CB conversion: Ping An issued Ashare convertible bonds on November 22, 2013 and the conversion periodcommenced from May 23, 2014 (six months after the initial issuance date).During the conversion period, if the closing price of the A shares in at least 15out of 30 consecutive trading days is equal to or higher than 130% of theprevailing conversion price (which has been adjusted to RMB41.2, followingdividend and H share issuance), Ping An has the right to redeem theoutstanding CB at the nominal value plus the interest accrued. This effectively means that Ping An has the option to call back the CB and forceinvestors to convert to equity when the return reaches above 30%. Ping An's shares have been trading above the threshold price (RMB53.6) forthe past 10 days, so the likelihood that the company will exercise its callbackoption is gradually increasing over the next couple of weeks. Limited fundamental impact: According to Ping An's announcement, at theend of September, the majority of the company's convertible bonds remainedoutstanding. If we assume that the issue is fully converted by year-end, thiswould increase Ping An's total outstanding shares by 7% (13% of A shares)and dilute EPS by ~7%. There is no further impact on the solvency ratio sincethe CB has been included as solvency capital from the end of 2013. We think this event could overhang Ping An's A shares in the shortterm but has no impact on the H shares.