💎 Fed’s first rate cut since 2020 set to trigger market. Find undervalued gems with Fair ValueSee Undervalued Stocks

China funds trim equity exposure amid tighter regulation, boost bonds: Reuters poll

Published 04/28/2017, 01:05 AM
Updated 04/28/2017, 01:10 AM
© Reuters.  China funds trim equity exposure amid tighter regulation, boost bonds: Reuters poll

SHANGHAI (Reuters) - Chinese fund managers have trimmed their suggested equity exposure for the next three months to the lowest in 6 months due to soured risk appetite amid tighter government regulations to contain speculation.

China's politburo, a top decision-making body of the ruling Communist Party, held the 40th study meeting on national financial security and stability this week, and President Xi Jinping made a rare speech on financial stability.

"We think it sends an important signal to support the ongoing tightening of financial regulation and enforcement," Citi wrote in a recent note.

The fund managers cut their suggested equity allocations to 76.3 percent, according to a poll of eight China-based fund managers conducted this week, down from 79.4 percent a month earlier.

It is the third straight month that asset managers have recommended cutting equity exposure.

The fund managers have, meanwhile, raised their suggested bond allocations for the coming three months to 11.3 percent from 7.5 percent a month ago.

They have also reduced recommended cash allocations to 12.5 percent, from 13.1 percent in the previous month.

"The decline in the second half of April was driven more by soured sentiment, as speculative money suffered setbacks. It could take time for the market to recover," a South China-based fund manager said.

Overall, the correction in the benchmark indexes was relatively sufficient given the recent sharp decline, a Shanghai-based fund manager said, adding there could be a rebound if the market steadies.

Average recommended allocations to financial stocks were raised to 15.6 percent from 12.5 percent, but recommended allocations to consumer stocks were down to 27.5 percent from 32.5 percent, indicating blue chips with lower valuations were favored as investors remained cautious for the moment.

"For now we prefer value investing, as it would take time to restore confidence in the market," another Shanghai-based fund manager said, referring to a long-term approach with focus on companies' fundamentals and growth prospects.

Investors shall refrain from "concept" stocks - usually small-cap and speculative plays, said the manager, adding he prefers the "One Belt, One Road" theme, cyclical stocks and financial plays.

"One Belt, One Road" is a signature economic policy of Chinese President Xi Jinping, envisioning massive infrastructure spending to link China to the rest of Asia and Europe.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.