China funds cut equity exposure to over one-year low, boost bonds

SHANGHAI (Reuters) – Chinese fund managers cut their suggested equity exposure for the next three months to the lowest level in more than one year, amid worries over tightening liquidity and profit-taking by institutional investors as the year-end approaches.

The fund managers reduced their suggested equity allocations to 71.9 percent from 79.4 percent a month earlier, according to a poll of eight China-based fund managers conducted this week.

The fund managers have boosted their suggested bond allocations for the coming three months to 6.9 percent from 5.6 percent last month.

They have also raised recommended cash allocations to 21.3 percent for the next three months, from 15 percent the previous month.   

“Liquidity conditions are a big concern ahead of the year-end, and investors also worry monetary policy would be tightened next year,” a South China-based fund manager pointed out.

Another fund manager, however, saw opportunities emerging after a month-long consolidation.

The fund managers surveyed remained mixed on asset allocations for the next month, with three suggesting a cut and only one signaling an increase, while four recommended the same level of equity exposure.

According to the poll, average recommended allocations for consumer shares jumped to an 18-month high, while those for electronics and financial stocks were substantially lowered, reflecting most funds’ preference for consumer firms amid a recent correction in the major indexes.

Average recommended allocations for consumer firms’ stocks were raised to 32.9 percent from 30 percent last month, those for financial stocks were cut to 17.8 percent from 21.4 percent, while those for electronics firms were reduced to 20 percent from 24.5 percent, according to the poll.

Investors could keep a watchful eye on firms with solid fundamentals and profit growth, as risk appetite could return to stable levels next year, a Shanghai-based fund manager said, suggesting exposure to stocks of liquor makers, home appliances makers, banks and insurers.

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To see other polls in this series, click on:

GB/ASSET – Reuters Britain-based asset allocation survey

US/ASSET – Reuters U.S.-based asset allocation survey

JP/ASSET – Reuters Japan-based asset allocation survey

EUR/ASSET – Reuters Continental Europe-based asset

allocation survey

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