How to prepare your money movements for Lunar New Year

22 January 2019

5th February marks the beginning of Chinese New Year, the longest holiday of the year! Also known as ‘Spring Festival’, the forty-day festival spurs the world’s largest annual human migration with many people making the journey back home to celebrate with loved ones.

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According to China Daily, almost 3 billion journeys are expected to be made during the holiday period travel rush. Daily trips alone are expected to hit a record high of 10.33 million.

The scale of migration is simply astounding. Last year, for example, more than 6.5 million Chinese travelled abroad and 386 million within China during the Lunar New Year holiday. To provide some comparison, in the same year Thanksgiving (America’s largest annual migration) saw a grand total of 54.3 million travellers.  

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What does this mean for the markets?

Typically, when a large Trading Center enjoys an extended holiday period, markets are exposed to one of two outcomes: 

  1. Quiet flow and low volatility, as participants decide to stay on the sidelines
  2. A spike in volatility due to the lack of liquidity in markets and the potential influence of automated trading strategies

Although Financial Markets have recently recovered¸ they were under significant stress a couple of months ago and activity indicators have been disappointing across the world since then, particularly across Europe and China. 

Only a couple of weeks ago, we saw what can happen during an extended holiday period. As Japan was enjoying consecutive public holidays, the AUD/JPY moved more than 4% in a matter of minutes on what the media labeled as a currency “flash crash”, crediting algorithms and illiquidity for the sharp moves.

This has been further amplified by events brewing in the background: Brexit; China/US tensions; the US government shutdown; and Trump’s investigation. 

Central Banks are taking action and the People’s Bank of China is cutting the reserve requirement ratio by 0.5% on January 25 (and previously on Jan. 15), on a move to offset liquidity fluctuations during the Chinese Lunar New Year holiday season, which normally sees higher demand for cash. 

"About 2.99 billion trips are expected to be made during the 2019 Spring Festival travel rush."

China Daily
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How to protect your business against market movements

With many businesses closed over the two-week holiday period, being prepared is the best way to protect your business from interruptions. Plan with suppliers in advance to make sure your orders are locked in and to ensure your products are shipped without delay during the holiday rush. Make sure you also factor in plans for after Chinese New Year, as it may take longer than expected for businesses to get back to full speed and some businesses can experience workforce shortages. 

If you’re an international business, it’s important to have a foreign exchange risk management plan to protect you from market fluctuations or bursts of currency volatility. OFX offers a number of risk management tools to help create greater pricing certainty, which for some businesses, can be the difference between a profit and loss.

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We know money transfers are about more than just simply making payments; they’re about helping your business run smoothly and helping you reconnect with family and friends. That’s why we work hard to ensure transferring money with us is fast, secure and easy all year round. 

With OFX, you can send money to 190 countries, including Singapore, Hong Kong, Malaysia. Register or login and make a transfer now to benefit from our great exchange rates, just in time for Chinese New Year.

From all the team at OFX, we wish you and your family a happy, healthy and prosperous year of the pig. Gong Xi Fa Cai! 

Sources:

  • Almost 3 billion journeys are expected during the 2019 Chinese New Yearhttp://global.chinadaily.com.cn/a/201812/22/WS5c1d763aa3107d4c3a002303.html

  • Numbers of Chinese citizens travelling in an out of China in 2018: https://jingtravel.com/chinese-travelers-lunar-new-year/

  • Chinese New Year annual human migration compared to Thanksgiving, America’s largest annual migration: https://www.forbes.com/sites/niallmccarthy/2018/02/14/chinese-new-year-the-worlds-largest-human-migration-is-about-to-begin-infographic/#5795944a124d