(Yicai Global) Feb. 18 -- International financial institutions are predicting China's capital markets will see their largest ever influx of capital this year as the world's second-largest economy continues to push its financial sector overseas.
The Chinese market could bring in as much as USD200 billion this year after a record-breaking inflow of USD120 billion in 2018, China Securities Journal reported, citing a recent Citibank publication. An increased weighting of Chinese mainland shares in MSCI indexes, and the inclusion of yuan-denominated government and policy bank securities' in the Bloomberg Barclays indexes will pave the way for success, according to the New York-based finance multinational.
The low proportion of foreign capital in China's asset allocation, the accelerated opening up of China's capital markets and the near record-low values of mainland shares after last year's plunge will all lead to a larger inflow this year, according to local firm Guosheng Securities. There are trillions of dollars waiting to hit the Chinese market, it added.
More and more cash has been flowing into China since the start of this year, and the potential for increased weight of mainland shares in MSCI indexes has "sparked aggressive equity inflow" via the Hong Kong, Shanghai and Shenzhen stock exchanges, according to a foreign exchange strategist working for Japanese bank Mizuho in Hong Kong. The Shanghai-London Stock Connect's potential launch this year further opens the floodgates for more money to enter China, he added.
Morgan Stanley also predicted last week that between USD150 billion and USD225 billion would find its way into the mainland this year, with USD70 billion to USD125 billion of that coming via stock markets. It expects typical stock market inflow will stabilize between USD100 billion and USD200 billion in the long term, several times greater than the USD35 billion average over the last three years.
The future is also bright for China's bond market and currency, Morgan Stanley predicts. It expects bond market capital inflow to range between USD300 billion and USD400 billion a year by 2030, and sees the yuan falling to 6.30 to the dollar by the end of 2020.