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Home / Business / China funds cut equity exposure to 18-month low amidst trade war fears, increase cash: survey

China funds cut equity exposure to 18-month low amidst trade war fears, increase cash: survey



SHANGHAI (Reuters) – Chinese fund managers have reduced their equity exposure to an 18-month low over the next three months as China-U.S. Gingerbread could bring uncertainties to the world's second largest economy and its capital markets.

FILE PHOTO: A man is seen against an electronic billboard with stock market information in a brokerage house in Fuyang, Anhui Province, China, on March 1
6, 2018. REUTERS / Stringer

They lowered their proposed equity allocation from 76.3 percent to 70 percent a week earlier, according to a survey of eight China-based fund managers.

The fund managers have maintained their recommended bond allocation at 8.8 percent for the next three months.

You have increased the recommended cash allocation from 15 percent in the previous month to 21.3 percent.

"Market participants are beginning to worry about economic growth and liquidity conditions in the wake of the impact of China-U.S for the full year 2018 (China), including trade tensions, financial regulations and Beijing's deleveraging," said a South China-based fund manager.

U.S. President Donald Trump's tariffs on Chinese goods could only be imposed in early June, government officials said on Wednesday with public consultations and possible customs revisions to gain time for negotiations to forestall them.

China warned the United States on Thursday to open Pandora's box and unleash a wave of protectionist practices around the world, even as Beijing pointed to US goods targeting a deepening Sino-US trade dispute could.

"Recently, there have been many uncertainties, including China-US trade waiver and US Federal Reserve rate hike," another fund manager said, adding that it could be difficult for small and medium-sized enterprises to expand on the recent strong gains because their reviews are not cheap.

Overall, the surveyed fund managers had relatively balanced views on asset allocation for the next month, with two advocating a rise, two a decline, while four recommended the same equity exposure.

According to the survey, average recommended allocations for electronic and consumer stocks continued to rise over the next three months while those for cyclical games, including financial and real estate companies, were reduced.

Growth stocks, notably technology companies, have gained momentum as Beijing has pledged strong support for the development of "unicorns" and other companies in emerging industries, including "green light" for their IPOs in the US. Stock market, a fund manager pointed out.

This came as Beijing focused more on the quality of its economy as it sought new growth drivers to boost the economy.

The pressure on financial and real estate stocks remained high, and investors should avoid the production and financial sectors, which could be badly affected in the case of a full-blown China-US. Trade war, the fund managers added.

The average recommended allocation for electronic stocks has risen from 15.9 percent in the previous month to 16.3 percent over the next three months, while that for consumer shares has risen to 29.6 percent from 28.1 percent, while that for financial firms has risen from 15 reduced to 15 percent were 18.8 percent last month.

coverage by David Lin, Luoyan Liu and John Ruwitch; Editing by Subhranshu Sahu


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