Chinese fund managers cut their recommended equity weightings to the lowest level in more than two years in August on fears of further economic deceleration,the latest Reuters fund poll showed. The average recommended stock weighting over the next three months fell to a 26-month low of 76.1 per cent,compared with 79.4 per cent a month earlier,according to the monthly poll of nine China-based fund managers conducted this week. The fund managers also cut their suggested allocations for bonds to 11.2 per cent from 11.8 per cent a month earlier,and boosted recommended cash holdings to 12.7 per cent from last month's 8.8 per cent. We have seen a rapid slowdown in profit growth,said one of the surveyed fund managers,who declined to be identified. There's also little room for the government to ease policies amid persistent house price inflation pressures. China's economy grew 7.6 per cent during the second quarter,the slowest pace in three years. Profit at major Chinese industrial companies dropped 5.4 per cent from a year earlier in July,the biggest monthly decline this year,according to the government data. Many investors are hoping that the government would unveil new stimulus measures to aid the economy and boost the market,but there's little sign of any major easing in policies. China's central bank has recently stepped up open market operations to ease short-term funding shortages among banks,sending a signal to the market that a reduction in banks' required reserve ratio is unlikely at least in the short term. One of the biggest risks to the stock market is that the government sits there doing nothing,said one of the fund managers polled. Reflecting battered investor confidence,China's Shanghai Composite Index fell to the lowest level in 43 months on Thursday,while the CSI300 Index of the top Shanghai and Shenzhen listings also slid to the lowest close since March 2009. Fund managers polled expected on average the Shanghai Composite index to bound back to 2,167 points over the next three months,up about 6 per cent from current levels. On sector allocation,fund managers raised their suggested weightings of consumer stocks which are less vulnerable to economic slowdown to a five year high of 21.7 per cent,compared with last month's 19.4 per cent. Recommended allocation to property stocks were raised to 15.3 per cent from 12 per cent,as fund managers bet they would rebound after being sold heavily.
