China funds raise suggested equity allocations

SHANGHAI, July 31 (Reuters): Chinese fund managers said they would raise the proportion of their portfolios invested in stocks over the next three months, following June's upward trend, amid hopes that China's economy is stabilising, according to a Reuters poll.
"This week, rules governing the purchase of real estate have been relaxed, the performance of the property market at the end of the third quarter will determine whether the economy has stabilised," said a Shanghai-based fund manager, who declined to be identified because he cannot speak to the media.
Chinese fund managers increased their suggested equity allocation for the next three months to 81.9 per cent from 79.4 per cent a month earlier, the highest weighting since January, according to a poll of eight China-based fund managers conducted this week.
Many fund managers said the loosening of monetary policy and government mini-stimulus programs would bring equity investment opportunities in the next three months. Indeed, Chinese stocks have rallied sharply in recent weeks after a raft of data showed the economy was regaining traction.
The economy grew slightly faster than expected in the second quarter at 7.5 per cent as a burst of government stimulus kicked in, but analysts said Beijing will likely need to offer further support to meet its growth target for 2014, especially if the already cooling property market starts to deteriorate more sharply.
To offset the impact of the housing slowdown, a growing number of cities and local governments have relaxed restrictions on home purchases and expectations of more easing have already boosted property related shares.
Funds reduced their suggested bond allocation to 4.5 per cent from 10.4 per cent a month ago, while slightly lowering their cash weightings to 13.6 per cent from 13.8 per cent in June.
This month, suggested allocations to financial services, real estate and auto stocks on average rose significantly from last month, but those for the electronic technology sector fell sharply.
The average recommended allocation for financial services rose to 18.5 per cent from 14.2 per cent last month, while recommended weightings for real estate shares increased to 10 per cent from 7.8 per cent in June.