How To Trade the Chinese Financial Market
In this article, you will learn how to trade the Chinese financial market using all of the products available via Admirals (formerly Admiral Markets), which includes Contracts for Difference (CFDs) on stocks, indices and currencies.
With CFDs you can potentially profit from rising and falling markets. This becomes useful when dealing with a Chinese financial market crash or boom. Let’s get started!
What is the Chinese Financial Market?
Since the coronavirus pandemic in 2020, there has been a lot of Chinese financial market news due to the large price swings in some of its markets. This volatility is set to continue, making it an interesting time to learn more about the region, the opportunities and of course, the risks.
Within the Chinese financial market structure, there are a variety of different markets that investors have access to, even though it is a closed market overall. Some of these markets include the Chinese stock market, indices and the Yuan.
Let’s have a look at each one of these in more detail.
Chinese Stock Market
The two biggest stock exchanges in China are the Shenzhen Stock Exchange and the Shanghai Stock Exchange. While international investors will find it difficult to buy and sell on these exchanges, many of the companies are listed on other global stock exchanges.
For example, many Chinese technology companies are also listed on the Hong Kong Stock Exchange which is more accessible for international investors. There are also many Chinese companies that are listed on American stock exchanges through ADRs (American Depositary Receipt).
An ADR is essentially a certificate from a US depositary bank representing a specific number of shares of a foreign company’s stock. With Admirals (formerly Admiral Markets) you can trade on more than 100 Chinese ADRs that are listed on the New York Stock Exchange and Nasdaq Stock Exchange, such as Baidu Inc, JD.com Inc, NIO Inc, Alibaba Inc and many more.
Source: Admirals MetaTrader 5, #BABA, Monthly - Data range: from 1 Mar 2016 to 22 Mar 2021, accessed on 22 Mar 2021 at 12:30 pm GMT. Please note: Past performance is not a reliable indicator of future results.
As an example, the chart above shows the long-term share price of Alibaba Inc ADR from the MetaTrader 5 trading platform provided by Admirals. From here you can search for a whole list of different ADR companies. Not all of the companies will be from China though, some may be from other international countries such as Brazil, Mexico and Chile who want to list in the United States via ADRs.
As the United States is home to the two largest stock markets in the world - the New York Stock Exchange and Nasdaq Stock Exchange - many foreign companies choose to list there via ADRs as it gives them access to more investors. If more investors choose to invest in the company, then the company has more capital to invest and grow which is why ADRs are popular.
Chinese Stock Indices
When people ask ‘what is China’s stock market called?’ they would typically be referred to the China A50 stock market index. In fact, when quoting on the Chinese financial market Reuters would typically focus on this index.
The index is also known as the FTSE China A50 Index as it was created and managed by the FTSE Group in the UK. So what does the index actually represent? Essentially, the China A50 Index represents the value of the top 50 companies listed on the Shanghai Stock Exchange and Shenzhen Stock Exchange.
When quoting the Chinese financial market Bloomberg and other outlets such as the Wall Street Journal and Financial Times may also quote another stock market index called the CSI 100 Index which is an index of the largest 100 companies from the CSI 300 Index.
Source: Admirals MetaTrader 5, #China50_J1, Monthly - Data range: from 1 Sep 2013 to 22 Mar 2021, accessed on 22 Mar 2021 at 1:30 pm GMT. Please note: Past performance is not a reliable indicator of future results.
The chart above shows the long-term trend of the China A50 Index Futures CFD. This Chinese financial market opens and closes 04:00 - 11.30 12.00 - 23:44 Monday to Thursday and 04.00 - 11.30 / 12:00 - 22:00 Friday in Eastern European Time (EET).
Currently, there is a lot of Chinese financial reform taking place. In the Chinese market today, antitrust regulators are cracking down on technology companies which is creating more volatility in the market. The Chinese financial market regulator is the China Securities Regulatory Commission (CSRC).
Index futures CFDs are interesting products to add to a trading portfolio. This is because CFDs (Contracts for Difference) allows traders to potentially profit from rising and falling market prices. As the Chinese stock market can be quite volatile, using CFDs help to either short or hedge any long exposure when dealing with a Chinese financial market crash.
Did you know that from the MetaTrader 5 trading platform provided by Admirals you can access real-time price quotes on more than 3,000+ instruments? You can also trade directly from the platform too!
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The Chinese Yuan is another way to capitalise on what’s happening in China. After all, a currency is reflective of how well an economy is doing. There are two types of currencies in China - the Onshore Renminbi Yuan and the Offshore Renminbi Yuan.
As China is a closed market, most traders would focus on the Offshore Renminbi Yuan. Admirals (formerly Admiral Markets), offers traders the ability to trade the USD/CNH currency pair which is the US dollar vs the Offshore Renminbi Yuan.
Below is a long-term price chart of the USD/CNH currency pair. As price moves up it means the US dollar is strengthening and the Offshore Renminbi Yuan is weakening. As price moves down it means the US dollar is weakening and the Offshore Renminbi Yuan is strengthening.
Source: Admirals MetaTrader 5, USDCNH, Monthly - Data range: from 1 Jan 2014 to 22 Mar 2021, accessed on 22 Mar 2021 at 2:30 pm GMT. Please note: Past performance is not a reliable indicator of future results.
The chart above shows some large swings in the currency pair. This is due to the fact the currency pairing itself is quite volatile. For many years under US President Donald Trump, US-China trade tensions escalated with reactionary measures against each other.
Even with new US President Joe Biden, the rhetoric is the same and many believe US-China trade tensions could escalate once more. This causes a lot of volatility in the currency pair as it affects a lot of international trade between the two countries.
Did you know that through the Premium Analytics feature provided by Admirals, you can access the Technical Insight Lookup Indicator? This indicator provides actionable insights and trading ideas across thousands of different markets.
Source: Admirals Premium Analytics, 22 March 2021
For example, in the screenshot above when searching for Alibaba (#BABA) stock, the Technical Insight Lookup Indicator has found 20 different technical events that are currently taking place over the short-term, intermediate-term and long-term.
These technical events show interesting events happening on some of the world’s most widely used technical trading indicators. It provides a chart and a detailed description of what is happening with the indicator.
This can be a great addition to your trading toolbox and is also a great educational tool to learn more about different technical trading indicators and how traders use them to make decisions.
Why Invest with Admirals?
- Start investing with a well-established company authorised and regulated by the UK Financial Conduct Authority (FCA) and the Cyprus Securities and Exchange Commission (CySEC) and other well-known financial regulators.
- You can open an Invest.MT5 investing account to buy stocks, shares and ETFs from 15 of the largest stock exchanges in the world and collect dividend payouts all from the MetaTrader 5 trading platform!
- You can open a Trade.MT5 trading account to access more than 3,000+ financial CFDs to potentially profit from rising and falling markets across stocks, ETFs, indices, commodities, currencies and more!
- Upgrade your MetaTrader 5 trading platform completely FREE by installing the Supreme Edition plugin to access a full range of additional indicators such as the Technical Insight Lookup indicator.
Did you know that you can get started today with a free demo trading account? This account allows you to test all of the services and features provided by Admirals (formerly Admiral Markets) in a virtual environment.
You can also test your trading ideas and strategies - all in a virtual environment. This helps to build the skills and confidence to eventually move to a live account.
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About Admirals (formerly Admiral Markets)
Admirals is a multi-award winning, globally regulated Forex and CFD broker, offering trading on over 8,000 financial instruments via the world's most popular trading platforms: MetaTrader 4 and MetaTrader 5. Start trading today!
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