China funds' suggested equity weightings at five-month high in April

Mutual funds in China raised their recommended equity weightings to the highest level in five months in April, as they continue to favour financials while reducing suggested exposure to energy and machinery stocks, the latest monthly Reuters poll of fund managers showed.
However, the broader stock index is expected to rise only slightly in the near term, according to the survey, reflecting investor concerns over inflationary trend and its impact on corporate earnings.
The average suggested equity weighting over the next three months rose to 83.9 percent, its highest since November, from March's 82.8 percent, according to the poll of nine China-based funds conducted this week.
Their suggested allocations for bonds were raised to 5 percent from 3.9 percent, while recommended exposure to cash fell to a six-month low of 11.1 percent from 13.3 percent a month earlier.
China has increased banks' required reserve ratios seven times and raised interest rates four times since last October in a fight against excessive liquidity and stubbornly high inflation in the world's second-biggest economy.
China may consider another interest rate hike to counteract negative interest rates and a hot property market, Xia Bin, a central bank adviser said in remarks published on April 20.
The fund managers polled see the main stock index little changed over the next three months, with the Shanghai Composite Index expected to rise 5 percent to 3,031 points on average in three months versus 2,887.04 points at Thursday's close.
Within an equities portfolio, the suggested weighting for financial shares was raised to a one-year-high of 20.6 percent from 18.3 percent a month earlier, while recommended allocation of energy and machinery stocks were slashed to 10.8 percent and 5.8 percent respectively, from 12 percent and 9.7 percent in March.
Chinese banks, which currently trade near historically low valuations, are benefiting from widening net interest margins and continuous loan expansion.