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Economic slowdown, financial market scandals and worries over IPO resumption dented the confidence of Chinese fund managers, who reduced their appetite for stocks for the third month in a row in April, the latest Reuters fund poll showed. The average recommended equity weighting in a fund portfolio dipped slightly to a five-month low of 80.3 percent from last month's 80.4 percent, according to the monthly poll of eight China-based fund managers conducted this week.
The fund managers surveyed raised the suggested allocation for bonds to 6.4 percent from last month's 5.8 percent, while reducing recommended cash holdings to 11.4 percent from 13.9 percent. "A possible resumption of domestic initial public offerings in May would pose the biggest risk to the market," said one fund manager who declined to be identified.
"Another risk comes from regulator investigations into bond market scandals, which would push up short-term interest rates." China's securities regulator has suspended IPOs since last November as part of an effort to improve the quality of listed companies. A resumption of IPOs would boost supply of stocks, potentially weighing on the market.
Investors are also worried about the health of China's economy, where first-quarter growth of 7.7 percent lagged far behind market expectations of 8 percent. The country's economic recovery has shown more signs of sputtering as the HSBC flash manufacturing purchasing managers index (PMI) for China fell to a two-month low of 50.5 in April, pointing to a sharp fall in export orders.
Amid market pessimism, however, some investors see opportunity. "If the economy shows signs of rebounding in the second quarter, that would give a boost to the stock market," said one fund manager. In terms of sector allocation, fund managers slashed suggested weightings in cyclical sectors including metals, machinery, energy and automobiles while recommending higher exposure to consumer and technology stocks.

Copyright Reuters, 2013

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