[DigitalToday reporter Jinju Hong] Overseas investors are effectively investing early in Chinese AI semiconductor companies through perpetual futures on cryptocurrency exchanges, it showed. An analysis said a new investment approach is spreading in which overseas investors, who find it difficult to invest directly in mainland Chinese stocks, use crypto derivatives to bet first on pre-listing prices.

On July 26 (local time), blockchain media outlet Cryptopolitan reported that overseas investors are actively trading perpetual futures on cryptocurrency exchanges that use Chinese memory chipmaker ChangXin Memory Technologies (CXMT) as the underlying asset ahead of its listing.

CXMT is set to list on the Shanghai Stock Exchange's STAR Market on July 28 and is seeking to raise about $10 billion. If it goes as planned, it would be the largest IPO in mainland China since 2010. TradeXYZ and Gate.com have already listed perpetual futures tracking CXMT ahead of the formal listing. CoinGlass said CXMT perpetual futures posted about $19 million in trading volume over the past 24 hours.

The product is structured to let investors bet on rises or falls in the share price without holding the actual stock. Trading takes place on crypto exchanges 24 hours a day and typically uses stablecoins as margin. Another feature is that it is a perpetual contract with no expiry.

Perpetual futures were originally used to invest in the prices of cryptocurrencies such as bitcoin (BTC) and ether (ETH), but recently their application has expanded to traditional financial assets including stocks, commodities and unlisted companies.

The industry views such products as being used to circumvent China's restrictions on foreign investment. China strictly limits overseas capital inflows into the Shanghai and Shenzhen stock markets, and foreign investors can invest only on a limited basis through the Qualified Foreign Institutional Investor (QFII) scheme or Hong Kong Stock Connect, among others.

The STAR Market where CXMT will list also has high entry barriers. Even individual investors in China must have at least 500,000 yuan in financial assets and more than 2 years of investment experience to trade. Perpetual futures, by contrast, do not face such eligibility requirements because they are contracts that do not involve delivery of actual shares.

TradeXYZ on July 23 also newly listed perpetual futures tracking Chinese semiconductor company GigaDevice Semiconductor. The product offers leverage of up to 10 times, allowing large positions with small margin, but losses can also be magnified by the same proportion.

The market is also seeing assessments that perpetual futures trading before listings are performing a price discovery function by reflecting investor expectations for future corporate value in advance.

Iggy Iofe (이기 이오페), chief investment officer at investment firm Theo, said, "Perpetual futures prices must ultimately converge with the underlying asset price," adding, "Because there is no expiry even after listing, you can continue to hold the contract."

Actual market prices showed a wide gap from the official IPO price. CXMT perpetual futures traded on Hyperliquid were priced at about $6.35 per share and at one point rose to $8.60. Based on that, the implied corporate value reached about $425 billion (about 2.9 trillion yuan), valuing it above the market capitalisation of Industrial and Commercial Bank of China (ICBC).

By contrast, CXMT's official IPO price was set at 8.66 yuan per share, implying a corporate value of about 579 billion yuan. With overseas investors unable to participate directly in the IPO, a separate "second price" was formed first on cryptocurrency exchanges.

The industry assesses the case as showing that crypto derivatives are beginning to perform some price discovery function in traditional financial markets beyond digital assets. Following cases in which derivatives linked to SpaceX and OpenAI were used as pre-listing investment vehicles, an analysis said that this time, mainland China stock market investment restrictions and overseas investor demand have combined to make the crypto market a new investment channel.