China, Pakistan, and Afghanistan are working together to strengthen their economic, security, and political ties. Their goal is to boost regional cooperation and stability. They plan to enhance development efforts and increase trade and investment. The countries are focused on improving security discussions and working together on law enforcement. Strengthening communication at different levels and building mutual trust are key goals.

Strengthening Bilateral Relations

China is backing Pakistan and Afghanistan in improving their relationship and aligning their interests. This means increasing exchanges and building trust among the three nations. Recently, there have been new commitments for economic and security collaboration among China, Pakistan, and Afghanistan. This shows a long-term plan to stabilize a historically unstable region. For traders, this might reduce the perceived risk related to investments in these countries. In the short term, we should pay attention to changes in volatility in Pakistan-focused ETFs. Historically, implied volatility for funds like the Global X MSCI Pakistan ETF (PAK) was often above 30% during times of uncertainty in the early 2020s. If this cooperation continues, we may see lower volatility, making strategies like selling put options on these ETFs more appealing, even if they carry some risk. The focus on development and investment highlights commodities. Afghanistan has large, untapped mineral resources, especially lithium and copper, which are central to this deal. We might explore long-dated futures strategies that forecast an eventual increase in global supply, potentially lowering prices in the coming years.

China’s Belt and Road Initiative

This agreement is a significant part of China’s broader Belt and Road Initiative (BRI). As reported in early 2025, freight volumes at essential BRI projects, such as Pakistan’s Gwadar Port, increased by 12% compared to the previous year. Traders should consider call options on Chinese construction and logistics companies that may gain contracts from upcoming infrastructure initiatives. From a currency viewpoint, more Chinese investment could support the Pakistani Rupee (PKR). The PKR began to stabilize against the U.S. dollar in the second quarter of 2025, following a tough 2024. Options on currency futures could help position for a less volatile or gradually strengthening rupee in the coming months. However, we must remain cautious since these are only commitments for now. The security situation in the region is still unstable, and similar projects have failed before. Therefore, maintaining some protective positions, like long puts on a broader emerging markets index, could be wise to guard against potential setbacks in these discussions. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now