Foreign institutional investors are topping up their holdings of China A shares in anticipation that they will be included in a global equity benchmark following the start of the Hong Kong-Shanghai Connect Program in mid-October.

Analysts said that inclusion in the widely followed Morgan Stanley Capital Index's Emerging Markets Indexes and other international benchmarks, including FTSE standard indexes, is of great importance to A share market because it can boost the confidence of foreign investors and lead to massive buying of shares from funds.

"While A shares are not part of any major global benchmark yet, we believe the conditions for them to be included in the MSCI EMI are already in place," a report issued by Goldman Sachs said.

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"We think the potential inclusion may catalyze a catch-up of allocations to China by global investors because it is under-represented in the global equity market universe relative to its economic influence ... investors are generally underweight on Chinese equities," Kinger Lau, chief China strategist of Goldman Sachs, wrote in the report.

"It makes sense that global investors will mainly focus on big caps because they are most likely to be included in the index," said an unnamed leading hedge fund managing partner based in Hong Kong.

Jonathan Garner, chief Asian and Emerging Market strategist at Morgan Stanley said as the Hong Kong-Shanghai mutual market access pushes forward, there are "reasonable reasons" to include A shares into the MSCI EMI.

The A shares should be included in MSCI EMI within two to three years with a small weightage in the initial stage, and then become the biggest element in five to 10 years, he said.

"The fact is that the Qualified Foreign Institutional Investors quota is almost fully used up by now," he said, noting that investors are picking A shares due to their preference for Asian shares recently because of their cheaper valuation, and the pick-up would continue as the stock connect program starts, broadening international investors' channels to buy.

The stock connect program will enable a northbound (Hong Kong to Shanghai) trade quota representing close to 5 to 20 percent of the existing free-float market cap and daily turnover of the Shanghai Stock Exchange. It will "significantly improve the accessibility of A shares to investors", together with the broadening Qualified Foreign Institutional Investor and Renminbi Qualified Foreign Institutional Investor programs, Goldman Sachs said.

The institution believes inclusion of the A shares will result in $5.3 billion of $21 billion passive fund buying in A shares by 2016. China's A-share market narrowly missed an opportunity this June for the inclusion into the MSCI EMI, due to investors' concerns over the limitation of investing in the A-share market, including QFII quota and qualification, capital control, as well as capital gains and other relevant taxation uncertainties.

Chia Chin-Ping, managing director and head of research, Asia Pacific, MSCI, said: "It is certainly a significant development in the context of the capital market opening up, but it is equally important that we wait for the stock connect to be implemented and investors start trading before getting further feedback from them."