China funds cut stock weightings on policy worries

Mutual funds in China have cut their recommended weighting for equities on worries that persistent government measures to curb surging property prices may weigh on the market, the latest monthly Reuters poll of fund managers shows.
Nine fund managers polled this week cut their stock weightings for the next three months to 86.4 percent, down from the previous poll's 88.3 percent, which was the highest since Reuters started conducting the poll in June 2007.
The average recommended allocation to bills and bonds rose slightly to 3.7 percent from 2.6 percent, while the suggested weighting for cash increased to 9.9 percent from 9.1 percent.
On average, the managers expect the mainland's benchmark Shanghai Composite Index to stand at 3,456 points three months from now, while forecasts ranged from 2,900 to 4,500 compared with a range of 3,200 to 4,500 in the prior poll. All but two of the forecasts were between 3,200 and 3,500 points.
The index ended Thursday morning trade at 3,273.863 points, poised for a hefty 80 percent gain for the year.
The eight managers who made projections on the yield on the one-year central bank bill in the secondary market gave an average forecast of 1.90625 percent in three months' time, up from 1.8802 percent on Thursday, according to Reuters Reference Rates. The previous poll had forecast a yield of 1.9 percent. Within an equities portfolio, the managers slashed their recommended allocation to the real estate sector to 6.3 percent from 13 percent in the last poll, reflecting the grim outlook for property shares.
Chinese leaders have increasingly voiced concerns about rapidly rising property prices and have taken steps to curb market speculation, with additional moves expected. Fund managers raised the recommended allocation for the consumer sector to 17.4 percent from 13.4 percent on expectations of strong holiday spending over the year-end and during the Lunar New Year in mid-February. The recommended allocation for the financial sector was trimmed slightly to 20.3 percent from 21.1 percent.