SHANGHAI (Reuters) - Chinese fund managers boosted their suggested equity exposure for the next three months to the highest level in seven months, as recent economic data helped lift expectations for the world’s second largest economy, a monthly Reuters poll showed.
The fund managers raised their suggested equity allocations to 78.8 percent, from 73.8 percent a month earlier, according to a poll of eight China-based fund managers conducted this week.
The fund managers have cut their suggested bond allocations for the coming three months to 8.1 percent from 10 percent last month.
They have also reduced recommended cash allocations to 13.1 percent for the next three months, from 16.3 percent the previous month.
“Expectations for domestic liquidity improved thanks to the central bank’s targeted reserve requirement rate cut, while better-than-expected PMI in September will continue to lift expectations for economic fundamentals,” a Shanghai-based fund manager pointed out, adding those factors along with solid profit growth from listed firms underpinned the stock market rally this year.
China’s central bank in end-September cut the amount of cash that some banks must hold as reserves for the first time since February 2016, in a bid to encourage more lending to struggling smaller firms and energize its lackluster private sector.
The PBOC said in a statement that the targeted RRR cut did not constitute a change to its prudent and neutral monetary policy.
Market participants also expect the targeted cut to support the real economy rather than the financial markets.
China’s manufacturing activity grew faster than expected in September as factories cranked up production to take advantage of strong demand and high prices fueled by a year-long building boom.
However, some fund managers were not that optimistic about the stock market in coming months.
Quite a few institutional investors could take profits as the year-end nears, while a potential seasonal fall in fourth quarter economic data could put major stock indexes under pressure, a South China-based fund manager said.
The fund managers surveyed held mixed views on asset allocations for the next month, with two suggesting a cut and two signaling an increase, while four recommended the same level of equity exposure.
According to the poll, average recommended allocations to consumer shares jumped, while those to cyclical firms including automobile, metals and energy stocks were lowered.
“We favor liquor makers, furniture & home appliance makers and insurers, as China’s spending power continues to improve as a whole, in particular in third and fourth-tier cities, with consumer sector contributing more to the country’s economic growth,” another Shanghai-based fund manager said.
Average recommended allocations to consumer shares were raised to a seven-month peak of 30.1 percent from 24.5 percent last month, while those to metals stocks were cut to 5 percent from 5.6 percent, according to the poll.
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
Reporting by David Lin, Luoyan Liu and John Ruwitch; Editing by Sunil Nair