In August, 2.65 million new A-share accounts were opened in China. Household deposits dropped by 600 billion yuan compared to the previous year, indicating that money from maturing long-term deposits was moved to the stock market. Non-bank deposits grew by 1.18 trillion yuan in August, which is 550 billion yuan more than last year. This shows that households are shifting their money into brokerage accounts and equity mutual funds.

Move Towards Stocks

Wealth management products saw little growth, falling by 150 billion yuan compared to last year. This supports the idea that funds are primarily going into stocks instead of other investments. The 35% increase in new A-share accounts over the month further suggests that households are favoring stocks. The average daily turnover of A-shares reached 2.25 trillion yuan, surpassing the highs seen in September 2024 and June 2015. With the rise in new accounts and record turnover, we can expect ongoing growth and more volatility in Chinese A-shares. The immediate focus should be on gaining long positions, likely through call options on broad market ETFs like the iShares FTSE A50 China Index ETF (FXI) or CSI 300 index futures. The increase in retail participation suggests that implied volatility may continue to climb in the upcoming weeks. This shift from savings to stocks is backed by strong policy support, which makes the trend more reliable for now. Since the People’s Bank of China cut a key lending rate in July 2025, the market has responded well, with the CSI 300 index up over 22% year-to-date. These supportive policies give confidence that the government aims to promote a strong market.

Trading Strategies and Market Volatility

The rise in daily turnover past previous highs is a key indicator for volatility traders. The China A50 Volatility Index, which tracks options prices, has reached its highest level in over a year, signaling expectations for larger price fluctuations. This makes long volatility strategies, like buying straddles, attractive for profiting from increased market volatility. However, we should remember the sharp drop that followed the 2015 retail rally, which also had record account openings and turnover. That bubble was inflated by excessive margin debt, a factor we need to keep an eye on now. To protect against a potential quick downturn, it’s wise to include some downside protection, such as buying out-of-the-money put options. For now, the plan is to ride the bullish trend while preparing for inevitable spikes in volatility. We will hold long positions through call spreads to manage costs while looking for signs of overheating, like a rapid rise in margin financing. The goal is to benefit from the current retail enthusiasm without falling prey to a sudden change in sentiment. Create your live VT Markets account and start trading now.

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