Chinese fund managers boost equity exposure

Poll finds raise prompted by new economic data is the highest in 7 months

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 in September, according to a poll of eight Chinabased fund managers.

The fund managers have cut their suggested bond allocations for the coming three months to 8.1 percent from 10 percent in September.

They have also reduced recommended cash allocations to 13.1 percent for the next three months, from 16.3 percent in September.

“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 Shanghaibased fund manager pointed out, noting those factors, along with solid profit growth from listed firms, underpinned the stock market rally this year.

The People’s Bank of China (PBC), the country’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 private sector.

Market participants also expect the targeted cut to support the real economy rather than the financial markets.

The PBC said in a statement that the targeted RRR cut did not constitute a change to its prudent and neutral monetary policy.

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, another fund manager said.