Chinese fund managers hiked their suggested equity exposure for the next three months, even as the market environment grew more complex amid the trade war between China and the United States. They raised their suggested equity allocations to 70.6 percent from 69.4 percent a month earlier, according to a poll of eight China-based fund managers conducted this week.
The fund managers have cut their suggested bond allocations for the coming three months to 10.6 percent from 13.1 percent, amid a wave of corporate bond defaults as credit risks emerged.
They have boosted recommended cash allocations to 18.8 percent from 17.5 percent in the previous month. "The volatility has climbed, as there is a combination of factors that are disturbing the market, including China-US trade tensions and rises in US treasury yields," a Shanghai-based fund manager said.
Worries over China-US trade spat had eased somewhat after the two countries issued a joint statement regarding trade consultations.
However, sentiment was knocked after the United States said it still held the threat of imposing tariffs on $50 billion of imports from China and would use it unless Beijing addresses the issue of theft of American intellectual property. China lashed out on Wednesday at renewed threats from the White House on trade, warning that it was ready to fight back if Washington was looking for a trade war.
The rise in equity exposure comes when MSCI, the US index publisher, is adding 234 yuan-denominated stocks in its global and regional indexes on June 1, following a review ahead of China's inclusion in MSCI's widely tracked equity benchmarks.
MSCI on Wednesday dropped telecom equipment and smartphone maker ZTE Corp and four other companies from several indexes including the MSCI China A Inclusion Index as trading in the China-listed A shares of all five companies has been suspended.
Overall, the fund managers surveyed held mixed views on asset allocations for the next month, with six recommending the same level of equity exposure and two suggesting an increase.
According to the poll, average recommended allocations for
consumer and auto stocks in the next three months continued to rise, while those for electronic and banking firms continued to fall, indicating the defensive stance of fund managers.
For the month, average recommended allocations for consumer stocks increased to a five-month high of 31.9 percent, from 31.3 percent the previous month, while those for electronic stocks were cut to 12.9 percent from 13.9 percent a month earlier.