Chinese fund managers boosted their suggested equity exposure to a seven-month high in September, according to a Reuters poll, as Beijing's stimulus measures to counter the impact of the Sino-US trade war appeared to have soothed investor nerves. Sentiment was also aided by FTSE Russell's decision this week to include mainland Chinese stocks in its global benchmarks, and proposals by rival index publisher MSCI to boost China's index weighting.
China stocks are poised to rebound for a second straight week this week, but is still down about 15 percent this year. Eight China-based mutual fund managers polled by Reuters this week raised their suggested equity allocations over the next three months to 72.5 percent, up from 66.9 percent a month earlier. Meanwhile, they halved recommended bond exposure to 5 percent, while proposed cutting cash holdings to 22.5 percent, from 23.1 percent last month.
"External uncertainty (from the trade war) has abated, while China stocks will be included in FTSE Russell's indexes," said a fund manager who participated in the poll, but declined to be identified. "We expect a market rebound."
US President Donald Trump's administration started levying additional tariffs on $200 billion of Chinese goods on Monday. Beijing retaliated with fresh tariffs on $60 billion of US products, and has unveiled a raft of stimulus measures to support consumption and economic growth.
"The Chinese government has announced a series of measures to offset the impact of the trade war ... and investor expectations are no longer as gloomy as a few weeks ago," said Bin Shi, head of China Equities at UBS Asset Management. Hopes that more China stocks will be included into mainstream global equity benchmarks also appeared to have boosted investor confidence.
FTSE Russell said on Thursday it will start including mainland shares in its flagship indexes from June next year, in a move that it expects will draw initial net inflows of $10 billion from passive investors. The FTSE announcement came a day after rival MSCI said it would consider boosting the Chinese share weighting in its indexes next year, potentially triggering $66 billion in broad foreign inflows.
"As China's representation in global benchmarks continues to increase going forward, we expect more inflows into China ETF's and domestic single equities," said Thomas Taw, vice president of the iShares Capital Markets function, APAC.
"Investors who have discretion and have started to put money into China are seeing valuations at extreme lows ... For investors who need to raise China exposure, this is being seen as a good opportunity to preposition going forward."
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