FOREIGN capital inflow into China’s A-shares market remains robust since the beginning of September after major global benchmarks announced widened inclusion of A-shares.

Net foreign capital inflow reached 45.9 billion yuan (US$6.5 billion) since the beginning of this month through stock connect schemes with the Shanghai and Shenzhen stock exchanges, according to a Friday report by the Economic Information Daily.

The figure accounts for about 27 percent of foreign capital inflow since 2019, which stood at 167.4 billion yuan.

The influx came after global index provider MSCI raised index weighting for Chinese A-shares from 10 percent to 15 percent, effective from Aug 27.

Another benchmark FTSE Russell strengthened the A-shares’ weighting in one of its indices from 5 percent to 15 percent, while the S&P Dow Jones Indices will weigh 1,099 A-shares at 25 percent in an upcoming inclusion.

The two moves that take effect today are expected to generate US$5.1 billion worth of inflow into the A-shares, according to FTSE Russell estimates and analysis from China Merchants Securities.

Analysts believe the A-shares are at the outset of a hot streak of foreign capital influx with more to follow as the country further opens up its financial sector.

China’s forex regulator scraped two investment quota restrictions for the Qualified Foreign Institutional Investors (QFII) and Renminbi Qualified Foreign Institutional Investors (RQFII) earlier this month to better facilitate participation in the financial markets.

The two programs have been important in the opening-up of China’s financial market, according to the State Administration of Foreign Exchange (SAFE).

China introduced the QFII scheme in 2002 and RQFII in 2011 as part of efforts to encourage foreign participation in its financial markets.

More than 400 institutional investors from 31 countries and regions have invested in China’s financial market in this way, according to the SAFE.

But the channels have become increasingly overshadowed by the Stock Connect and Bond Connect schemes, which allow overseas investors to access China’s onshore markets with no quotas.

The QFII deregulation comes as a growing number of global index publishers, such as MSCI, FTSE Russell and S&P Dow Jones Indices are adding China stocks and bonds into their benchmarks.

“Reforms such as today’s, combined with ongoing index inclusion, ensure that China’s capital markets continue to move into the global investment mainstream,” said Justin Chan, co-head of HSBC’s Asia-Pacific markets division.

Eugenie Shen, head of asset management group at Asifma, noted that the schemes offered a broader range of investable securities than through Stock Connect.

“It is a further commitment to irreversible capital account opening and will be seen as positive by markets participants,” said Jean-Charles Sambor, deputy head of emerging market fixed income at BNP Paribas Asset Management.

In the future, qualified foreign institutional investors under the two programs only need to register to remit funds independently to carry out securities investment.

Foreign investors will find it more convenient to participate in China’s financial market, and its bond market and stock market will be better accepted by the global market, according to the SAFE.

(SD-Xinhua)