China's domestically listed stocks, or A-shares, have barely budged for the past few years, but a combination of debt-default concerns and reform measures may spur the market higher.
"China's A-share market is becoming, quite simply, too big to ignore," HSBC said in a note, citing planned sweeping reforms which include allowing more foreign funds into a stock market still largely closed to overseas investors.
Liberalizing the capital account to allow more foreign investment in the market would be a "game changer," HSBC said. It noted MSCI is considering including A-shares in its emerging markets index, with a final decision set for June.
With around $1.5 trillion benchmarked to the MSCI Emerging Market Index, inclusion could send billions flowing into A-share markets, HSBC said.