BEIJING (Bloomberg) — China's inflows of speculative capital will increase as investors bet on currency gains, adding to the threat of asset-price bubbles next year, Capital Economics Ltd. said.

"Hot money" flows "are likely to rise as probable loosening of the renminbi's peg to the dollar in the first half of 2010 reawakens speculative interest in likely future appreciation", London-based economist Mark Williams said in an e-mailed note dated Wednesday.

Hot money may have accounted for $20 billion to $30 billion of the $141 billion increase in foreign-exchange reserves in the third quarter reported by the Chinese central bank yesterday, Williams estimated. Extra cash in the economy from the trade surplus and a pick-up in foreign direct investment will add to bubble risks, the economist said.

A report today showed house-price gains accelerating. In the southern city of Shenzhen, prices climbed 11.1 percent in September from a year earlier, the statistics bureau said. Across the country's 70 biggest cities, the gain was 2.8 percent, the most in a year.

The Shanghai Composite Index of stocks has climbed 64 percent this year.

China halted the yuan's gains against the dollar in July last year to help exporters as the global economy slowed. The yuan is a denomination of the renminbi.

Foreign direct investment rose 18.9 percent to $7.9 billion in September from a year earlier, climbing for a second month, the Ministry of Commerce said at a briefing in Beijing yesterday.