Chinese fund managers trimmed their suggested equity exposure for the next three months, as they adopted mixed investment strategies after a sharp correction in major stock indexes since early February. They cut their suggested equity allocations to 76.3 percent from 76.9 percent a month earlier, according to a poll of eight China-based fund managers conducted this week.
The fund managers have boosted their suggested bond allocations for the coming three months to 8.8 percent from 6.9 percent last month. They have lowered recommended cash allocations to 15 percent from 16.3 percent.
"The A-share market, after having made robust gains in the previous months, tracked steep losses on Wall Street in early February," said a South China-based fund manager. "For the moment, we see more upside risks than downside risks, considering more resilience in China's economy and moderate valuations in the A-share market as a whole," he added.
Market participants were keeping a close watch on the impact of certain amendments to the wording of China's constitution. China's ruling Communist Party on Sunday set the stage for President Xi Jinping to stay in office indefinitely, with a proposal to remove a constitutional clause limiting presidential service to just two terms in office.
"The possible extension of Xi's tenure could help ensure political stability and would be good for promoting deeper and wider economic reforms," said Yang Hongxun, a Shanghai-based analyst at investment consultancy Shandong Shenguang. Yang's view was echoed by brokerage Everbright Sun Hung Kai, which said a more powerful Xi could make policy implementation more efficient, for example, at local government and state-owned enterprise levels.
However, another fund manager surveyed was cautious. "Despite a recent strong rally in the A-share market, we could still see potential risks ahead, including possible rate hikes in China and US, and major correction in overseas markets," he said.
Overall, the fund managers surveyed were bullish on asset allocations for the next month, with three suggesting an increase, one suggesting a cut, while four recommended the same level of equity exposure.
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