China's better-than-expected economic data in the first quarter has buoyed investor sentiment.[Provided to China Daily]

Overseas investors' risk appetite for China's A shares has increased and this means stock markets will continue to attract foreign capital, analysts said.

For, key economic data came out better than expected, property prices are up, and the US Federal Reserve has kept a dovish stance on its monetary policy, they said.

The benchmark Shanghai Composite Index rebounded 12 percent in March as this year's economic data buoyed investor sentiment.

"Over the past two weeks, global investors' interest in the A-share market has shown signs of improvement. Several large overseas exchange-traded funds that track the A-share indices saw net subscriptions," said Gao Ting, head of China strategy at UBS Securities, in a research note.

Gao cited the rebound in manufacturing activity, which expanded in March against the contraction in February, and expected industrial profits in March against the losses in January and February as evidence of improvement in the economy in the first quarter of this year.

The northbound trading under the Shanghai-Hong Kong Stock Connect program has seen net purchases of 18.1 billion yuan ($2.79 billion) since March. Shares of brokerages and banks are among the northbound funds' most-bought stocks, according to the report by UBS Securities.

Matthew Sutherland, senior investment director for equities at global asset management firm Fidelity International, said that while the Chinese economy is decelerating, the new economy, particularly the consumer- and information technology-related sectors, will continue to offer good investment opportunities for foreign investors.

"As low-value-add businesses move away, China is acquiring the tools required to compete throughout the entire production chain, including upmarket technologies and high-level skills," he said.

According to a Fidelity International survey, 36 percent of its 200 equity and fixed-income analysts worldwide predict China's slowdown will have no, or a somewhat positive, impact on companies' strategic investment plans.

According to the survey, some European analysts believe China's slowdown will not have any impact on the stocks they cover.

As for investors, they are seized of the likelihood of China's A shares being included in the MSCI Emerging Markets Index.

MSCI Inc, the global index provider, is scheduled to announce in June its decision on whether or not to include the A shares in its Emerging Markets Index. Any inclusion would attract an estimated $20 billion in investment to the A-share market initially, analysts said.

The company had postponed the decision last year citing market barriers to foreign investors in China. It, however, resumed the review this month and started soliciting opinions from international institutional investors.

Analysts said compared to last year, there is a better chance this year for A shares to be included in the MSCI index.

"If A shares are included in MSCI global indexes, the long-term positive implication will be more far-reaching than the short-term benefits of potential capital inflows, since A shares would attract stronger interest from global investors," Gao with UBS Securities said.