May 31, 2012 / 8:02 AM / 5 years ago

China funds suggest higher equity exposure on stimulus hopes

SHANGHAI (Reuters) - Chinese fund managers boosted their suggested equity weightings in May to the highest level in six months, encouraged by signs that Beijing may ease policy further to bolster flagging economic growth, the latest monthly Reuters fund poll showed.

The average recommended stock weighting in the next three months rose to 83.9 percent from 79.8 percent, the poll which surveyed nine China-based fund managers this week showed.

The fund managers raised their suggested allocations for bonds to 11.2 percent from 10.8 percent, but slashed the recommended cash exposure to 4.9 percent from 9.5 percent.

“The biggest opportunity for the stock market comes from government stimulus measures to support economic growth,” said one of the surveyed fund managers, who declined to be identified.

To prevent a further slowdown, China announced a series of policy steps in recent months, including allowing banks to set aside less money as reserves and fast tracking approval for infrastructure projects. Beijing has also introduced incentives for buying home appliances and automobiles.

China is also considering measure such as interest rate cuts and tax rebates to support economic growth, sources familiar with the government’s thinking told Reuters.

However, some fund managers who participated in the poll expected only a marginal rise in the stock market, arguing that the current round of easing won’t be anything near the 4 trillion yuan ($629.2 billion) stimulus announced in 2008.

Fund managers polled on average expected the benchmark index .SSEC to rise to 2,513 points over the next three months, up six percent from the current level of around 2,370 points.

On sector allocation, fund managers raised their suggested weightings of consumer stocks to 20 percent from 18.1 percent a month earlier, betting the government will roll out more policies to stimulate consumption.

Fund managers also boosted their suggested exposure in auto stocks to 9.3 percent from 7.6 percent, as China recently announced incentive schemes for auto purchases.

Additional reporting by David Lin; Editing by Jacqueline Wong

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