According to a report by Citi, the record amount that poured into China`s financial markets in 2018 could see an increase in 2019. The bond and stock markets in China saw a massive $120 billion in inflows last year and that amount could reach $200 billion this year. The Chinese A-shares or yuan-denominated stocks traded on the mainland – were included in the MSCI Emerging Markets Index for the first time last year. This means that investors can access the Chinese Equity market more easily. According to sources, MSCI is considering whether to further increase the weighting of A-shares in its indexes – an announcement on its decision could come by the end of February.
The key issue now for China is the trade talks. Despite the positive talk coming from many in traded markets, we at Classiarius believe that the US China trade talks will not have a solution this week, this month or this year. Still, there are more investors moving into China. The possibility of uncertainties surrounding Chinese investments will ease, according to one expert on the ground. There are many index funds and ETFs or exchange traded funds that are expanding.
However, if trade talks do in fact continue without any strong response from the US and China, investment flows could continue to increase, hitting that $200 billion market mentioned above. There is also a yuan-denominated Chinese government and policy bank security that will be included in its bond benchmark, according to sources. Of course if bonds products are expanding, the amount of flow into China is likely to increase dramatically.