Foreign capital may continue to flow into the A-share market as the widely-tracked global indexes start incorporating more Chinese shares, fueling a potential market recovery, analysts said on May 27.

FTSE Russell, a leading global multi-asset index provider, said on May 25 it would add 1,097 A shares－approximately 30 percent of all A shares and covering large to microcap shares－to its global benchmarks from June 21.

The inclusion marks the index publisher’s first step to incorporate the A-share market and will be implemented in a phased-in manner, due to take effect in June 2019, September 2019 and March 2020, respectively.

Upon completion of this inclusion, the A-share market will represent about 5.5 percent of the FTSE Emerging Index and draw an expected net $10 billion from passive global investors, according to FTSE Russell.

The inclusion in June is expected to usher in $2.4 billion into the A-share market, said Zhang Xia, chief strategy analyst at Shenzhen-based China Merchants Securities.

FTSE Russell’s inclusion of A shares comes close on the heels of index compiler MSCI adding A shares to its global benchmarks from June last year.

MSCI is scheduled to add more A shares after the market closes on May 28, nearly doubling the weighting of A shares in its indexes. The move is estimated to bring in another $3.8 billion worth of passively managed funds, Zhang said.

“As the index inclusions will funnel foreign capital into the stock market, and economic fundamentals will anchor the renminbi against the greenback, the recent large-scale foreign capital outflow may falter and turn into net capital inflows in the near future,” said a report form Huatai Securities, based in Nanjing, Jiangsu province.

Till May 27, a net total of 54.7 billion yuan ($7.93 billion) flowed out of the A-share market through northbound trading under the stock connects in May, exceeding the historical monthly high in July 2015, according to Shanghai-based information provider Wind Info.

The outflow was driven by mounting uncertainties of Sino-US trade tensions, which spooked investors and triggered a depreciation of the yuan against the US dollar and fluctuations of the A-share market, the report said.

Investor sentiment has recovered into a wait-and-watch manner, helping the market recoup recent losses over the next one-month period, said a report released by Hong Kong-based BOC International (China) Co Ltd on May 26.

Foreign capital inflows from the index inclusions and potential policies to offset external uncertainties will also fuel the uptrend, the report said.

Meanwhile equities closed higher on May 27 at the mainland bourses, with the benchmark Shanghai Composite Index up 1.38 percent to 2892.38 points, after registering a five-week losing streak.

However, the market is not likely to see a major surge due to the lingering external uncertainties, analysts said.

“Disruptions (trade tensions) will continue to influence markets in the short term as a lack of conviction and direction continues,” said Paras Anand, head of asset management for Asia-Pacific at Fidelity International.

Structural opportunities will still shine, Anand said, citing that accommodative monetary policy will support quality names, while potential further fiscal stimulus will boost infrastructure related sectors.