Crypto traders are getting access to China’s AI stock rush through a route Beijing did not build for them. Instead of buying mainland shares, offshore investors are using perpetual futures tied to Chinese chip companies.
The contracts let users to wager on share values without actually holding the shares, and they are traded continuously on cryptocurrency exchanges.
Due to this arrangement, a distinct market for names has been established that is difficult for foreign capital to access through regular exchanges.
The biggest target is CXMT, a Chinese memory-chip maker due to start trading in Shanghai on Monday. TradeXYZ and Gate.com have listed perpetual contracts linked to the company before its public debut.
CoinGlass recorded about $19 million in CXMT perp volume over 24 hours. The chipmaker wants to collect nearly $10 billion, which would make the deal mainland China’s largest IPO since 2010.
Crypto platforms give offshore traders a way around China’s stock access rules
Beijing maintains a controlled framework to prevent foreign investment in Shanghai and Shenzhen stocks. Typically, foreign investors participate through the Qualified Foreign Institutional Investor framework or Hong Kong’s Stock Connect program.
There are restrictions to both methods. While limits limit the amount of money that can go through the authorized routes, Stock Connect only covers a limited number of businesses.
CXMT will enter Shanghai’s STAR Market, which has strict entry requirements for locals. Retail traders are required to maintain a minimum of 500,000 yuan, or around $74,000, in qualifying assets.
Additionally, a two-year trading history is necessary. This prevents many mainland purchasers from taking the company’s pricing into consideration.
Since the trader never receives the shares, perpetual futures eliminate those account regulations. The product started out in cryptocurrency marketplaces as a means of placing bets on assets like Bitcoin without acquiring ownership.
Also, it has no expiration date. Stablecoins are typically posted as collateral by users, who then take a long or short position depending on where they believe the price will move.
It now encompasses more than just tokens. Benefits linked to stocks, commodities, and private businesses are posted on cryptocurrency exchanges. They have already been employed by traders to gain early exposure to SpaceX and OpenAI prior to their public offerings.
SpaceX contracts have also been used by Chinese users to circumvent laws intended to prevent the flow of funds out of the nation.
On Wednesday, TradeXYZ added a new Chinese chip contract. The new perp gives ten-fold leverage and tracks GigaDevice Semiconductor (SSE: 603986). This implies that losses can increase at the same rate as gains, yet a small deposit can manage a much larger position.
CXMT’s crypto price runs far above the company’s planned Shanghai valuation
A pre-IPO perp trades on guesses about what a company may be worth once its shares begin public trading. A buyer makes money when the listed stock opens above the derivative price. After the debut, a market data feed is expected to pull the contract closer to the live share price.
Theo’s chief investment officer, Iggy Ioppe, stated that the perp should match the underlying stock. Tokenized real-world assets are used by Theo. Instead of closing the position on a predetermined date, traders can continue to use the contract after the listing because it never expires.
The CXMT contract on Hyperliquid was trading close to $6.35 per share on Thursday. Before declining again, it had reached $8.60. The suggested corporate value was close to $425 billion, or around 2.9 trillion yuan, on Thursday.
That valuation would place CXMT above Industrial and Commercial Bank of China (SSE: 601398; HKEX: 1398). ICBC, the biggest mainland-listed company, is valued at about 2.56 trillion yuan.
The official IPO figures are far lower. The first sale price announced by CXMT was 8.66 yuan, or around $1.28 per share. As a result, the chipmaker’s initial worth is close to 579 billion yuan. The sale would still be the biggest IPO on the STAR Market in spite of this.
Without purchasing the underlying assets, hyperliquid enables users to trade futures linked to commodities, stocks, and cryptocurrencies.
Due to the inability of overseas investors to directly join the listing, offshore demand contributed to CXMT’s contract being significantly higher than the Shanghai offer price. As a result, before the official share is transferred, a second price is created on cryptocurrency rails.
