China considers stock speculation restrictions to promote stable growth, affecting CNH bids
by VT Markets
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Sep 4, 2025
China is considering steps to limit stock speculation. The goal is to encourage steadier growth in the stock market.
This decision has affected the CNH, with some bids being pulled back. The aim is to create a stable financial environment.
As China works to reduce stock speculation, we can expect lower volatility in Chinese stocks. This could make selling options on indices like the FTSE China A50 a smart strategy. A government-managed “steady” market usually means limited upside potential and a supported downside, which lowers implied volatility.
Looking at the numbers, the volatility index for the CSI 300 has dropped to 18.5, the lowest since the calm period in early 2024. This suggests that selling volatility, using strategies like short strangles, may be effective. The situation feels similar to the extended periods of low volatility that China experienced after the 2015 market crash. We can expect realized volatility to stay low due to government policies.
The immediate impact on the currency is a weaker offshore yuan, as aggressive investments looking for quick stock gains are retreating. This suggests we should explore positions that benefit from a rising USD/CNH, such as buying call options. This pair has already moved past the 7.35 level this week, a key resistance point during the summer.
This perspective is reinforced by the PBoC’s actions, which have set the daily onshore yuan fix lower than market expectations, indicating a preference for a weaker currency. A lower yuan is beneficial for exports, and it appears that stock market stability is currently more important than maintaining a strong currency. This reduces the immediate risk of intervention to strengthen the yuan, which favors our positions.
by VT Markets
Sep 4, 2025
Insights 
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