SYDNEY, July 23 (Reuters) - China's top companies have

raised a record $14 billion in offshore convertible bonds so far

this year as they diversify future funding needs while interest

rates stay high.

Offshore convertible bonds from mainland China accounted for

22% of global deals, LSEG data showed, after Alibaba Group ( BABA )

raised $5 billion in May and Ping An Insurance

finalised a $3.5 billion transaction last week.

The amount raised so far this year from China is up 1,588%

on the same period in 2023, the data showed, when just $829.3

million was raised in convertible bonds.

The pick-up in Chinese convertible bond issuance is giving

dealmakers hope that capital market activity will start to lift,

especially in Hong Kong, where IPOs are at the lowest point in

15 years. The previous 12-month high was $10.9 billion in 2021.

"If you think about the typical sequence in which the

markets reopen, it's typically blocks, primary equity and

convertibles that will lead and the last product to reopen is

IPOs," said Saurabh Dinakar, co-head of Asia Pacific global

capital markets at Morgan Stanley

"In the past two years, we didn't see activity across any of

the products. And frankly, there was a lack of conviction from

international investors around investing in Hong Kong and China.

I think what's changed over the last three months is that some

of the confidence has returned."

Dinakar said international investors have shown renewed

interest in recent Chinese deals since they exited the market as

China recovered from the pandemic.

"Investors want to talk about China, and they want to

understand what's going on in China. There has been an uptick in

the dialogue. It's not that they are going to rush back in,

given there's still a degree of caution, but at least there is a

dialogue which was not the case 12 months back," he said.

Globally, there has been $64.2 billion worth of convertible

bonds issued in 2024, and in Asia aside from China, Japan's deal

value has increased by 486.2%, according to LSEG.

Investors buy convertible bonds because they offer the

prospect of equity gains while still paying a coupon, and with

their principal repaid at maturity if the option to convert into

shares is not exercised.

Bank of America recently upgraded its full-year global

convertible bond issuance forecast by 11% and now expects there

to be up to $110 billion worth of deals in 2024.