Aug 28, 2018 (China Knowledge) - With increasing global markets volatilities this year and a strong dollar that is adding pressure on emerging market currencies and asset prices, the outflows of capital are expected to channel into A-shares.
Due to Chinese government easing the access of foreign funds into the domestic equity and bond markets the proportion of foreign investments are expected to rise. The introduction Stock Connect from Shanghai and Shenzhen to Hong Kong have resulted in 2.4% of foreign capital of A-shares markets, but still it is far less than other overseas markets of between 20% and 30%.
The accelerated process of China's opening up to the outside world also widens the channels for international capital access. This include A-shares officially added to MSCI in June; regulators easing of foreign institutional funds, lifting A-shares trading to foreign residents are welcome by both local and foreign market participants.
A-shares is also expected to be added in the Russell Index as reported China Securities Journal. Further away from the Hong Kong capital market, Shanghai Stock Exchange is linking to London stock exchange that allows the flow of investments from the Europe.
The current low market prices since trading at the high early this year make buying attractive with discount some 20%, this enhance value buying opportunities.
With reference to the stock market of Taiwan and South Korea in the 1990’s and early 2000 the accelerated inflows of foreign capital resulted in weakening of strong dollar cycle on their currencies to some extent.
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