Widening Performance Gap and Trading Opportunities
We are seeing a significant performance gap between onshore and offshore Chinese equities that we expect to continue in the coming weeks. The A-share market’s focus on AI-related hard tech is a key driver of this strength. Recent data from May 2026 shows this gap widening, with the CSI 300 Index gaining 4% while the Hang Seng Tech Index remained flat. For derivative traders, this suggests establishing a pairs trade by going long futures on the FTSE China A50 or CSI 300 indices. This position can be hedged by taking a short position in futures tracking the Hang Seng China Enterprises Index (HSCEI). This strategy directly plays the divergence between the domestic, tech-focused economy and the more globally-sensitive offshore listings. Given the positive momentum, we see opportunities in selling out-of-the-money puts on A-share ETFs to collect premium. This follows the People’s Bank of China’s recent announcement on May 28th to lower the reserve requirement ratio for banks specializing in technology loans. This strategy benefits from either a continued rise or a period of consolidation in the onshore market.Currency Tailwinds and Sector-Specific Exposure
A strengthening renminbi is another key factor that could attract global capital, and we are positioning for further appreciation. The USD/CNH exchange rate has recently broken below the key 7.15 level, supported by stronger-than-expected export data for April. We would consider using call options on the yuan to gain upside exposure with defined risk. We believe options on specific onshore semiconductor and industrial automation ETFs offer a more targeted way to gain exposure to this trend. China’s industrial output in these sectors grew 15% year-over-year in the first quarter of 2026, underscoring the fundamental strength. This pattern is reminiscent of the 2019-2020 period when domestic-focused tech policies led to a similar, sustained outperformance of the ChiNext index over offshore counterparts.Start trading now — click here to create your real VT Markets account.
