Can Chinese New Year Drive a Market Rally? History Says So

Market Analysis
Celine Khattar
31 January 2025

Cities and villages across Asia have been buzzing with anticipation as they welcome the Year of the Snake.  

While streets are overflooded with mandarins, red envelopes, and golden decorations, the other side of the world is left wondering whether financial markets will experience a seasonal boost this year. 

 

The Year of the Snake 

Lunar new year 2025’s celebrations started on Wednesday, January 29th and end on Wednesday, February 12th. 

  • Golden Week – coinciding with Spring Festival Holiday – was initially implemented in 2000 by the Chinese government as a way of boosting tourism and domestic consumption during this time. 

  • It is also aimed at giving workers some time off to visit their hometowns and spend time with their families over the New Year. 

  • This festival is historically known to influence China’s overall economy. 

  • Various commodities, the yuan, and even some of the Chinese stock market can witness volatility around this time of the year.  

  • This festival is historically known to influence China’s overall economy. 

  • The first and clearest impact on the Chinese economy is related to trade, particularly exports – in which there is an annual decline in output at the beginning of the New Year. 

 

However, is the Chinese stock market fully closed for the New Year?   

  • Mainland China’s stocks, bond, foreign exchange and commodity futures markets closed down on Tuesday, January 28th and will resume trading activities on Wednesday, February 5th. 

  • As for Hong Kong, trading in the stock market will be closed from Wednesday, January 29th and will resume on Monday, February 3rd. 

 

Chinese New Year’s Effect on Stock Market 

The impact of this holiday on the stock market is generally mixed. Typically, there is a positive sentiment leading up to Golden Week, which can lift the China A50 index.  

Before the close of the stock market, we tend to see a lot of profit-taking behaviour to finance spending over the holidays, which can lead to fluctuations in share prices. However, this is usually followed by a spike once the market reopens.  

Let’s take 2022 for example: Hong Kong shares saw one of their best sessions in two weeks once the market reopened after Lunar New Year’s three-day closure. The Hang Seng index (Hong Kong 50) was up 2.71%.  

This year, China’s stock market has suffered the worst start to the year in a decade:

  • The CSI 300 index closed down 2.9pc on Thursday, January 2nd, marking its steepest decline on the first day of annual trading since 2016. 

  • The Hang Seng index also fell by 2.2%.  
     

The Yuan 

Cash is king during Chinese New Year. As a new year tradition, people give cash as gifts in the form of “red packets”. Consequently, the rising demand for cash can cause a strengthening of the Chinese yuan against major currencies at the year start.  
 

Did you know? The USD/CNH wrapped up January lower 4 out of 5 times from 2018 to 2022.  


 

As Donald Trump returns to the White House, the offshore yuan has fallen to its lowest level in over two years against the US dollar. Analysts predict that Asian currencies will face continued pressure amidst global uncertainties and the threat posed by renewed tariffs. 

  • On the last trading day of 2024, the yuan dropped to 7.3698 per US dollar, making it the weakest point since October 2022 when it exceeded 7.37.  

  • Simply put, a higher figure indicates a weaker yuan, as it takes more of the currency to buy one dollar.  

Commodity Price Fluctuations 

With China remaining the world’s largest producer and consumer of gold, prices see a seasonal boost during this period. Increased demand for gold and jewellery as gifts drives prices up early in the year.  

Other metals – copper, aluminium, and nickel – are also impacted. As a matter of fact, in 2017, the London Metal Exchange reported a 50% drop in copper futures trading volumes on the first trading day of the Chinese New Year.  

 

Bitcoin’s Lunar Comeback? 

Analysts have predicted Bitcoin will make a strong comeback during the Lunar New Year. According to current data, BTC is trading at $105K after declining by almost 0.20% in the last 24 hours. 

Historically speaking, the world’s largest cryptocurrency by market cap has experienced strong gains during the Lunar New Year, with data revealing an 83% success rate for price increases during the festive period.  

  • Over the past 12 years, BTC delivered positive returns in 11 of them, making it one of the most statistically consistent trends in the market. 
     

  • On average, BTC has achieved a 21.2% gain in the 10 days before and after the Lunar New Year, which reinforces once again February’s reputation as one of its best-performing months.  

 

Memecoins Surfing the Zodiac Wave 

With Trump’s launch of his own coin $TRUMP, memecoins have been in the spotlight.  

This year’s celebrations have fuelled a speculative frenzy in the crypto space, especially with snake-themed memecoins inspired by the Year of the Snake as per the Chinese zodiac. Plenty of these tokens saw explosive growth before experiencing harsh corrections.  

 

  

  1. One notable Solana-based token, “The Year of the Snake,” briefly reached a $1.7 million market cap before falling below $1 million.  

  2. Another Ethereum-based offering called “Chinese New Year” dominated Dextool’s rankings on Jan. 28, soaring an interesting 119,194%, peaking at $7 million in market cap. 

 

DeepSeek Adds a Twist This Year 

China seems to be taking centre stage this Lunar New Year. A Chinese artificial intelligence company called DeepSeek has been grabbing the world’s attention and even sending shock waves through Wall Street. 

In short, DeepSeek may be the best Chinese New Year gift to China this year. 

ChatGPT’s new rival is catching investors off guard due to its low development costs for its AI app. On January 20th, DeepSeek-R1 was revealed to the world, which sent the stock market crashing down – with Nvidia taking a severe hit. 

  • Nvidia’s share dropped 17% - wiping out $600 billion in market value in a single day – the largest one-day loss in the stock market. 

  • Nvidia’s CEO saw his net worth fall from $121 billion to $100 billion, a 20% loss. 

  • Nvidia’s valuation had dropped below Apple and Microsoft, making it the third-most valuable company in the world. 

 

However, other major players in the industry have also suffered significant losses: 

  • ASML’s shares tanked 7% 

  • Broadcom slumped 17% 

  • TSMC fell by 14% 

  • Meta and Alphabet also faced big declines 

 
Last Words 

To answer the question of whether Chinese New Year actually affects the markets, there is multiple factors to take into consideration – liquidity, investor sentiment, economic conditions, PBoC interventions, etc. 

For context, China’s central bank kept a key policy rate steady in January while injecting liquidity into the financial market, signalling that it might hold benchmark rates unchanged for an extended period. 

While CNY can be a catalyst for a short-term rally, the depth of its impact depends on broader market conditions, economic policies, and overall sentiment. If China’s economy shows strong and PBoC provides needed support, markets could see a temporary lift.