Foreign investors' increasing participation in China's A-share trading will help improve market functioning and boost performance of large-cap equities and consumer stocks, analysts said.

Foreign investors' role has become more important in recent years, they said.

According to Aberdeen Standard Investments, a London-listed global asset manager, holdings of foreign investors in the A-share market accounted for about 2.5 percent of total market capitalization as of June this year, up from 2.1 percent and 1.3 percent by the end of 2017 and 2016.

"We expect the proportion to rise in the following years, considering A shares' inclusion in major global indexes such as the MSCI Emerging Markets Index," said Nicholas Yeo, head of China Equities at Aberdeen.

The trend, Yeo said, will likely help improve corporate governance in mainland listed companies, because foreign investors prefer such companies to make their long-term investments sustainable.

To attract long-term capital, many Chinese listed companies are striving to improve corporate governance. Foreign investors are keen to see more Chinese companies, including State-owned enterprises, proactively making full disclosures about market-sensitive information. This includes information like incentives for senior executives, said Yeo.

"To increase foreign investors' interest in A shares, policymakers have been adjusting rules."

One such adjustment was to reduce trading suspensions. Compared to 2015, overall suspensions have declined by 80 percent this year, according to market data.

Zhang Xia, chief strategy analyst at China Merchants Securities, said foreign investors could help solve the twin problems of the Chinese stock market－the lack of long-term investments and the prevalence of short-term speculative trading.

Typically, foreign investors adopt long-term investment strategies, and prefer large-cap stocks and consumer stocks－which is likely to help those stocks to register good performance in the future, Zhang said.

"We are overweight on consumer discretionary ... it's a continuing theme for us," said Kevin Anderson, head of Asia Pacific investments at State Street Global Advisors. He made the remark while sharing the company's view on Chinese stocks for 2019 in a roundtable.

Foreign investors' keen interest will likely make trading in large-cap A shares more active than before and their prices more elastic, said Hong Rong, founder of investor education platform Hongda Education and an MBA tutor at the Shanghai Advanced Institute of Finance.

"As foreign investors 'lock' part of their holdings in a large-cap stock to implement long-term investment strategies, a smaller trading volume can cause the same price changes, attracting more investors to trading in the stock," Hong said.