Chinese Funds Reduce Proposed Equity Risk Amid US-China Trade Uncertainty
Market participants are beginning to worry about economic growth and liquidity conditions in China for the entire 2018, given the effects of trade tensions between the US and China. Yesterday, China once again urged the United States to refrain from measures that could, in one way or another, provoke further deterioration in bilateral trade relations. Beijing claims that there is a risk of triggering a chain reaction that will spread the trade protection virus around the world.
Chinese fund managers have reduced the proposed equity risk for the next three months amid fears that trade uncertainty between the US and China could lead to uncertainty for the world's second-largest economy and its capital markets. The proposed equity allocations were reduced to 70% from 76.3% a month earlier, which is a minimum of 18 months. At the same time, the proposed bond issues for the next three months will be at the level of 8.8%.
Average recommended allocations for electronic stocks in the next three months were boosted to 16.3% from 15.9% the previous month, those for consumer shares were raised to 29.6% from 28.1%, while those for financial firms were reduced to 15% from 18.8% last month. Chinese fund managers claimed "There have been many uncertainties recently, including China-US trade spat and rate hike by the Fed,", adding that it could be hard for small- and mid-cap firms to extend recent strong gains as their valuations are not cheap.