Changpeng Wan
– Chinese stocks, particularly tech and entertainment names like iQiyi and Xunlei, experienced significant overnight gains, with some jumping over 20%. – The rally was fueled by new regulatory measures from China’s National Radio and Television Administration aimed at boosting content supply and innovation. – Strong performance of recently listed companies like Insta360, backed by firms like Xunlei, contributed to investor optimism. – Shifting capital flows, with household deposits moving into riskier assets like stocks, provided additional momentum. – Foreign investor interest in Chinese assets remains strong, supported by structural factors and attractive valuations. Overnight, U.S.-listed Chinese stocks defied a sluggish broader market to post impressive gains, with iQiyi and Xunlei leading the charge by soaring over 20%. This sharp upward move in Chinese assets wasn’t isolated to a few names—the Nasdaq Golden Dragon China Index opened strong, and numerous other Chinese companies registered substantial gains. The rally reflects a powerful combination of supportive regulatory developments, strong individual company performances, and broader macroeconomic shifts that are driving capital toward Chinese equities. Understanding what’s behind this surge provides crucial insights into both the evolving investment landscape for China concepts and the broader dynamics reshaping global capital allocation.
The Overnight Market Moves in Detail
While major U.S. indices like the Dow Jones, S&P 500, and Nasdaq Composite traded flat to slightly negative during the August 18th session, Chinese assets stood out with remarkable strength. The Nasdaq Golden Dragon China Index, a key benchmark tracking Chinese companies listed in the U.S., opened with gains exceeding 1.2% before settling slightly lower but still firmly in positive territory.
Biggest Gainers and Their Performance
Several Chinese companies registered double-digit percentage gains that caught investors’ attention: – iQiyi surged approximately 20% after initially jumping as much as 27% during the session – Xunlei skyrocketed over 20%, with an intraday peak approaching 29% – Douyu climbed more than 10% – Zhihu advanced 9.81% – Kingsoft Cloud gained over 5% – Dingdong Maicai rose more than 7% Even established giants participated in the rally, with JD.com and Baidu both posting gains exceeding 1%, while Alibaba, Tencent Music, Pinduoduo, and Li Auto registered more modest but still positive moves.
Xunlei’s Extraordinary Rally and Its Insta360 Connection
Xunlei’s spectacular performance deserves particular attention, as it wasn’t driven solely by market sentiment but by specific value creation within its investment portfolio. The company holds a significant 7.84% stake in Insta360 (影石创新), an A-share listed company that recently went public on Shanghai’s STAR Market.
The Insta360 Effect on Xunlei’s Valuation
Insta360 itself has been performing exceptionally well, securing a 20% daily limit up move—referred to as a ’20cm涨停’ in Chinese market parlance—and marking its second consecutive day of hitting the upper trading limit. This surge pushed Insta360’s total market capitalization to approximately 107.9 billion yuan. Based on Xunlei’s 7.84% ownership stake, the value of its Insta360 holding now exceeds 8 billion yuan. This creates a fascinating valuation disconnect: Xunlei’s entire market capitalization on U.S. markets reached only about $500 million (approximately 3.59 billion yuan) at the time of writing, meaning the value of its Insta360 stake alone is more than double the company’s entire market valuation. This discrepancy highlights how traditional valuation metrics can become disconnected when companies hold valuable stakes in rapidly appreciating assets. In its recently disclosed second-quarter earnings report, Xunlei recorded an unrealized gain of $720 million from its Insta360 investment. Under Generally Accepted Accounting Principles (GAAP), this contributed to a staggering quarterly profit of $727.4 million—an increase of 28,996% year-over-year.
Regulatory Tailwinds: The Content Boost Driving iQiyi’s Surge
While Xunlei benefited from specific investment gains, iQiyi’s powerful rally was fueled by broader regulatory developments that promise to reshape China’s content landscape. On August 18th, China’s National Radio and Television Administration (NRTA) published implementation measures titled ‘Several Measures to Further Enrich TV Screen Content and Promote Radio and Television Content Supply.’
Key Provisions of the New Content Measures
The regulatory document outlines multiple approaches to strengthen content development and increase supply of high-quality audiovisual programming: – Implementation of a ‘Content Refresh Plan’ to encourage innovation – Revised management policies on drama episode counts and seasonal drama broadcast intervals – Improved efficiency in television content review processes – Enhanced production, broadcasting, and promotion of ultra-high-definition programming – Support for high-quality documentary and animation creation – Encouragement for outstanding short-form dramas to reach television broadcast – Facilitation of excellent foreign program introductions for Chinese audiences Additionally, the measures emphasize strengthening relevant legal regulations and improving copyright protection for programming. These developments represent significant positive catalysts for content platforms like iQiyi, which stand to benefit from both increased content flexibility and potentially reduced regulatory uncertainty.
iQiyi’s Content Success Story: ‘All Things Grow’
Beyond regulatory support, iQiyi has been enjoying remarkable success with its original content. The platform’s ‘Great Theater’ recently launched a new production titled ‘All Things Grow’ (生万物) that has been achieving extraordinary viewer engagement metrics. On August 16th, ‘All Things Grow’ reached a content heat value exceeding 10,000, earning it a place in iQiyi’s ‘Hall of Honor.’ The drama has consistently ranked first across multiple charts on third-party data platforms including Cool Cloud, Lighthouse, and Maoyan. According to Cool Cloud Entertainment data, the series achieved 57.24 million full-platform views on its premiere day, followed by 77.42 million views on its second day—maintaining its top position. Perhaps most impressively, ‘All Things Grow’ achieved peak real-time ratings exceeding 3% on CCTV-8, demonstrating successful simultaneous popularity across both traditional television and streaming platforms—a rare ‘dual explosion’ achievement in the increasingly fragmented media landscape.
Broader Market Context: Chinese Assets Gaining Momentum
The overnight surge in U.S.-listed Chinese stocks didn’t occur in isolation but rather as part of a broader strengthening of Chinese assets across markets. On the same day, A-shares set multiple records, with the Shanghai Composite Index reaching a 10-year high. Perhaps most significantly, the total market capitalization of China’s A-share market surpassed 100 trillion yuan for the first time in history—a major milestone that reflects growing investor confidence in Chinese equities.
The ‘Deposit Migration’ Phenomenon Fueling Market Gains
Recent financial data helps explain the source of capital driving these market gains. The People’s Bank of China’s latest financial statistics report for July showed that household deposits decreased by 1.11 trillion yuan, representing a year-on-year decline of 780 billion yuan. Simultaneously, non-bank deposits increased by 2.1 trillion yuan, a significant expansion from the previous year’s figures. This pattern suggests what analysts term ‘deposit migration’—households moving funds from traditional savings accounts into higher-yielding investment products, including stocks and funds. Numerous institutions believe this shift represents a crucial factor behind recent capital market vitality. CITIC Securities’ macro team recently published research noting that household deposit migration appears to have begun. Driven by changing asset allocation structures, improving investment sentiment, and better risk-reward ratios, portions of household savings are likely flowing toward risk markets like equities. When market conditions improve, this deposit migration can bring substantial incremental capital inflows, providing sustained funding support for stock markets.
Foreign Investment Flows: Global Capital Embracing Chinese Assets
Beyond domestic capital rotation, foreign investors are increasingly allocating to Chinese assets, reflecting growing global appetite for yuan-denominated investments. According to Jia Ning, Director-General of the State Administration of Foreign Exchange’s International Payments Department, foreign investors currently hold approximately 3-4% of China’s domestic bond and stock market capitalization. Director-General Jia noted that ‘foreign allocation to yuan assets still possesses relatively stable and sustainable growth space.’ Supported by multiple positive factors, foreign capital is expected to gradually increase its allocation to Chinese assets over time. This trend reflects both the ongoing internationalization of the yuan and China’s increasing weight in global investment portfolios.
Structural Factors Supporting Foreign Interest
Several structural factors make Chinese assets attractive to foreign investors: – Valuation disparities compared to other major markets – Inclusion in major global indices, forcing passive fund allocation – Diversification benefits due to imperfect correlation with other markets – China’s economic growth trajectory relative to developed markets – Currency appreciation potential as China continues financial market reforms These factors combine to create a compelling case for increased foreign participation in Chinese markets, which in turn provides additional support for asset prices.
Investment Implications and Looking Ahead
The overnight surge in Chinese assets, particularly names like iQiyi and Xunlei, reflects multiple converging positive developments rather than a single catalyst. Regulatory support for content creation, strong individual company performance, domestic capital rotation from savings to investments, and growing foreign interest collectively created a powerful upward momentum. For investors, understanding these interconnected dynamics is crucial for navigating Chinese market opportunities. The regulatory environment appears to be shifting toward support for specific sectors like content creation, while broader macroeconomic trends are driving capital toward risk assets. Company-specific developments, such as Xunlei’s valuable stake in a rapidly appreciating STAR Market listing, can create significant valuation discrepancies that alert investors might identify before the broader market. Looking forward, the key question is whether these positive trends will sustain further gains in Chinese assets. The deposit migration phenomenon appears to be in early stages, suggesting potential for continued domestic capital support. Foreign allocation to Chinese assets remains low by global standards, indicating room for increased participation. And regulatory developments seem oriented toward supporting rather than restricting certain sectors. However, investors should remain cognizant of risks, including potential regulatory changes, geopolitical tensions, and broader market volatility. The extraordinary gains seen in names like Xunlei and iQiyi, while impressive, also raise questions about sustainability and appropriate valuation levels. For those considering Chinese asset exposure, a diversified approach that considers both U.S.-listed ADRs and direct A-share investments might provide the most balanced risk-reward profile. Monitoring regulatory developments, corporate earnings, and capital flow trends will be essential for navigating this dynamic investment landscape. As Chinese assets continue to gain prominence in global portfolios, understanding the unique drivers behind their performance becomes increasingly important for investors worldwide.
