How to Trade the Chinese New Year

The Chinese New Year, scheduled for February 17, 2026, isn’t a one-holiday celebration in China. The festivities continue for days. While the markets and factories remain closed only for a few days, trading volume may remain low for longer. During the festival, the demand for cash increases and logistical challenges escalate. This impacts the domestic and global markets, meaning your trading strategy needs to be tuned to explore market opportunities during this time.

How Does the Chinese New Year Affect Markets?

The second most populous country in the world celebrates the New Year in traditional ways, which impacts the financial markets.

Red Packets Drive the Demand for Cash

Cash is the most common New Year’s gift in China, given in red envelopes. Businesses also give out bonuses and settle accounts before the holiday begins. Capital flows out of the markets as the demand for cash rises. This also leads to profit-taking and the closing of trading positions on a large scale. In the short term, this supports the Chinese yuan (CNY).

Gifting Prosperity Fuels Seasonal Peak in Gold

Exchanging gold gifts during the Spring Festival is believed in China to bring prosperity. This drives the demand for gold jewellery, gold coins and gold bars. In the few weeks preceding the New Year, imports of the yellow metal into the country rise. This leads to a seasonal spike in gold prices.

Industrial Hibernation Affects Global Supply Chains

Among manufacturers, there is a rush to get goods out of China before the holiday begins, which creates capacity constraints in January. During the holiday season, most manufacturing units remain closed for about two to four weeks. This is because most workers travel long distances to their hometowns and often don’t return to their jobs. When factories resume after the holiday, it might take a few weeks to reach full production capacity and clear backlog orders. Plus, supply chains remain constrained due to an insufficient workforce. This also impacts global supply chains as China is the world’s largest goods exporter.

The Demand for Base Metals Takes a Hit

The “factory of the world,” as China is often called, comes to a halt during the Lunar New Year celebrations. This eases the demand for iron ore and copper, weighing on the prices of these base metals. Since China plans to become a clean energy and EV manufacturing hub, it may also impact silver demand. 

Trading Strategy for the Chinese New Year

Trading volumes are thin during the Chinese New Year Holiday. This leads to poor liquidity and wider price swings. This necessitates risk management. It is considered better to reduce risk-per-position by opening smaller trades. Using stop-loss can help mitigate the risk of unfavourable price moves. You need to be aware of the days when the markets will remain closed to manage overnight positions and account for rollover fees.

Discover Trading Opportunities

Since the markets are less active, you need to strategically adjust your market watch list to discover trading opportunities. Areas that can potentially generate trading opportunities are:

Retail & E-commerce: Increased spending on gifts and new clothes may support the retail and e-commerce sectors.

Travel & Tourism: TheSpring Festival is considered Chunyun, a period of travel, in the country. Stocks of aviation, hospitality and booking platforms may surge due to increased domestic demand. This especially happens in the weeks leading up to the Chinese New Year.

Gold: Increased demand for gold usually lifts prices. The markets remain bullish on gold during this time.

Forex (Yuan): Demand for cash may strengthen the Chinese yuan. 

Metals and Australian Mining: The Australian mining sector bears the brunt of scanty Chinese imports. Experienced traders may take short positions on Australian indices, such as the AUS 200 and AU 50.

Derivative instruments, such as CFDs, allow you to explore positions in rising and falling markets. Consider trading CFDs to explore opportunities created by index movements in either direction.

Waiting it Out

Taking positions can be tricky when volumes and liquidity are low. Many traders prefer to patiently wait for the right setup to take positions that align with their trading strategy. For beginners, the best trading strategy to navigate low-volume, high-volatility situations could be stepping back.

Historically, the Lunar New Year’s effect on the stock market leads to a surge in the HK50, as investors return with fresh capital. The gift money often finds its way into retail accounts, leading to a surge in liquidity and trading activity. This, in turn, creates more opportunities right after the holidays end.

Take Chinese Economic Data with a Pinch of Salt

Early Chinese data can be unreliable. This is because the markets are significantly less active during the festivities than in the rest of the year. Also, the floating (changing every year) New Year date makes year-on-year comparisons difficult. Finally, labour absenteeism can lead to unexpected delays in resuming manufacturing capacity.

Experienced traders do not rely on individual prints and wait for the combined January-February data to adjust their medium-term trading decisions. This data is typically released in mid-March, and provides a smoothened, accurate view of the year’s true economic trajectory. Most institutional moves also happen early in January or later in March, as trends are confirmed and adjusted data is available for reference.

To Sum Up

• The Chinese New Year will be celebrated on February 17, 2026, but market impacts start weeks in advance.
• High demand for cash may lead to profit-taking and a stronger yuan, while seasonal gifting pushes gold prices in the weeks leading up to the holiday.
• China’s industrial hibernation slows down global supply chains and weighs on the demand for base metals, like copper and iron ore.
• The retail, e-commerce, and travel (Airlines/Hotels) sectors might see potential gains due to the Chunyun travel rush.
• Experienced traders prefer to fine-tune their trading strategies for the Spring Festival trading season.
• Risk management with smaller trade sizes and strict stop-loss orders is crucial while trading the Chinese New Year.

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