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Why iQiyi Stock Popped Today

By Steve Symington - Updated Feb 3, 2020 at 3:49PM

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Chinese regulators are working to stem the economic impact of the coronavirus.

What happened

Shares of Chinese streaming-video platform leader iQiyi (IQ 1.03%) were up 9.6% as of 1:30 p.m. EST Monday despite a relative lack of company-specific news. Instead, the cause of today's jump appears to be news that Chinese regulators are taking steps to bolster stock market liquidity and support affected businesses amid the coronavirus outbreak in the country.

Family watching television together on the couch.

Image source: Getty Images.

So what

For perspective, iQiyi stock only just plunged nearly 10% in a single day on Jan. 24 amid growing fears of the economic fallout of the coronavirus epidemic.

Meanwhile, China's bond, stock, and currency markets are preparing to reopen after a more than weeklong Lunar New Year break. The holiday was initially scheduled to end on Jan. 30 but was extended through Feb. 2 to curb the spread of the virus. On Sunday, China's central bank announced it will inject 1.2 trillion yuan (or roughly $171 billion at current exchange rates) of liquidity into the markets to ensure adequate liquidity as trading resumes.

The China Securities Regulatory Commission also told the South China Morning Post on Sunday that it believes the impact of the coronavirus outbreak should be short-lived, adding that it will leverage a number of monetary policies to stem that impact.

Now what

If successful, Chinese regulators' moves could serve as a backstop for preventing significant economic damage, propping up the broader market and, in turn, the continued growth of iQiyi's subscription-based streaming services.

Investors will receive more color to that end when iQiyi reports fourth-quarter 2019 results on Feb. 27. But in the meantime, it's no surprise to see the stock rebounding today.

Steve Symington owns shares of iQiyi. The Motley Fool recommends iQiyi. The Motley Fool has a disclosure policy.

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