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Saturday 29 November 2008
Mutual Funds Raise Stock Weighting
Mainland mutual funds have raised recommended allocations to stocks after the government’s announcement this month of a massive economic stimulus plan, a Reuters poll of fund managers shows.
Mainland mutual funds have raised recommended allocations to stocks after the government’s announcement this month of a massive economic stimulus plan, a Reuters poll of fund managers shows.
The funds have also cut their suggested holdings of bills and bonds because of concern that yields may have dropped too rapidly.
The poll of nine mainland-based funds was taken this week, with about half the funds replying after the central bank announced on Wednesday its biggest monetary easing in a decade.
On average, the funds raised their suggested allocation to equities within a balanced portfolio to 72.2 per cent for the next three months, from their previous recommendation of 67.2 per cent, which was the lowest level since the poll was launched in mid-2007.
Many fund managers expect further government measures to aid the economy in coming months, although they concede that risks will remain high.
“The scale of the economic downturn may exceed expectations, and the low point has not yet been reached,” said one manager, who declined to be named.
On average, the funds expect the Shanghai Composite Index to stand at 2,111 points three months from now, which would only bring the stock market back up to its level in mid-October.
The index closed at 1,871.156 yesterday.
The funds reduced their average recommended allocation to fixed income from last month’s record high of 21.7 per cent to 20.6 per cent.
Although further monetary easing is expected next year, bill and bond yields have already fallen steeply, in some cases to levels that are difficult to justify with normal pricing models.
Yields on short-term central bank bills, for example, are at roughly the same level as the seven-day bond repurchase rate, a key funding rate for banks.
“Bond yields are already too low; they have reacted excessively to the prospects for lower interest rates,” said another manager surveyed. Within an equities portfolio, funds recommended raising the average weighting for machinery shares sharply, from 8.3 per cent to 9.7 per cent. These companies may benefit from heavy government spending on infrastructure projects.
The average suggested weighting for transport shares also rose sharply, from 8.4 per cent to 10.8 per cent.
The recent drop in global energy prices may help transport companies, while the government is expected to provide financial assistance to major airlines.
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Mutual Funds Raise Stock Weighting
Reuters in Shanghai
29 November 2008
Mainland mutual funds have raised recommended allocations to stocks after the government’s announcement this month of a massive economic stimulus plan, a Reuters poll of fund managers shows.
The funds have also cut their suggested holdings of bills and bonds because of concern that yields may have dropped too rapidly.
The poll of nine mainland-based funds was taken this week, with about half the funds replying after the central bank announced on Wednesday its biggest monetary easing in a decade.
On average, the funds raised their suggested allocation to equities within a balanced portfolio to 72.2 per cent for the next three months, from their previous recommendation of 67.2 per cent, which was the lowest level since the poll was launched in mid-2007.
Many fund managers expect further government measures to aid the economy in coming months, although they concede that risks will remain high.
“The scale of the economic downturn may exceed expectations, and the low point has not yet been reached,” said one manager, who declined to be named.
On average, the funds expect the Shanghai Composite Index to stand at 2,111 points three months from now, which would only bring the stock market back up to its level in mid-October.
The index closed at 1,871.156 yesterday.
The funds reduced their average recommended allocation to fixed income from last month’s record high of 21.7 per cent to 20.6 per cent.
Although further monetary easing is expected next year, bill and bond yields have already fallen steeply, in some cases to levels that are difficult to justify with normal pricing models.
Yields on short-term central bank bills, for example, are at roughly the same level as the seven-day bond repurchase rate, a key funding rate for banks.
“Bond yields are already too low; they have reacted excessively to the prospects for lower interest rates,” said another manager surveyed. Within an equities portfolio, funds recommended raising the average weighting for machinery shares sharply, from 8.3 per cent to 9.7 per cent. These companies may benefit from heavy government spending on infrastructure projects.
The average suggested weighting for transport shares also rose sharply, from 8.4 per cent to 10.8 per cent.
The recent drop in global energy prices may help transport companies, while the government is expected to provide financial assistance to major airlines.
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