Contrary to the US, Chinese stock markets exhibit negative overnight returns that appear to be highly affected by the extent of information asymmetry. China's "T+1" trading rule, which prohibits same-day selling, exacerbates adverse selection for uninformed buyers by limiting them to react to post-trade information. An information asymmetry-driven price discount thus emerges at market open, generating negative overnight returns, which further decrease with information asymmetry. Consistent with adverse selection, empirical evidence reveals lower overnight returns during market declines and high-volatility periods, with robust negative relationship between overnight returns and information asymmetry proxied by firm size, analyst coverage, and earnings announcement proximity. A model is introduced to rationalize our findings. This framework also sheds light on China's "opening return puzzle", the phenomenon that prices rise rapidly in the initial 30 minutes of trading, by showing how reduced adverse selection enables rapid price recovery during opening session.