August 31, 2018 / 5:14 AM / 3 months ago

China funds maintain equity exposure amid caution over trade spat

SHANGHAI (Reuters) - Chinese fund managers maintained their suggested equity exposure for the next three months, as caution prevailed amid worries over Sino-U.S. trade war.

A China yuan note is seen in this illustration photo May 31, 2017. REUTERS/Thomas White/Illustration

They maintained their suggested equity allocations at 66.9 percent, unchanged from a month earlier, according to a poll of eight China-based fund managers conducted this week.

They lowered their suggested bond allocations for the coming three months to 10 percent from 14.4 percent.

They boosted their recommended cash allocations to 23.1 percent from 18.8 percent in the previous month.

“Overall, we believe the stock market is bottoming out,” a Shanghai-based fund manager said.

However, risks for stocks persist, which mainly are external uncertainties including Sino-U.S. trade frictions and local governmental bonds defaults, a South China-based fund manager said.

U.S. President Donald Trump is prepared to quickly ramp up a trade war with China and has told aides he is ready to impose tariffs on $200 billion more in Chinese imports as soon as a public comment period on the plan ends next week, Bloomberg News reported on Thursday.

The benchmark Shanghai Composite Index .SSEC plumbed a more than 18-month low in mid-August before blue-chip firms led a rebound. However, trading volumes have been low.

Overall, the fund managers surveyed held mixed views on asset allocations for the next month, with two recommending boosting equity exposure, two suggesting a cut, and four suggesting a status quo.

According to the poll, average recommended allocations for electronics & technology, and transport & infrastructure stocks in the next three months rose sharply, those for financial and consumer firms dropped a bit, as fund managers seek bargains in techs after their steep losses and as Beijing vows more support for infrastructure investment.

China almost quadrupled the value of fixed-asset investment projects approved in July from the previous month as Beijing looks to accelerate infrastructure spending to stabilize the cooling economy.

For the month, average recommended allocations for electronics & technology firms rose from 11.3 percent to 14.8 percent, those for transport & infrastructure shares were raised to 7.5 percent from 3.1 percent a month earlier and for financial stocks, were lowered to 15.6 percent from a five-month peak of 18.1 percent.

Reporting by David Lin, Luoyan Liu and John Ruwitch; Editing by Vyas Mohan

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