CHINESE fund managers increased their suggested equity allocation for the next three months, after recommendations hit a 10-month low in February, although sentiment remains lukewarm as concerns about China’s economy grow, according to a recent poll.

    March’s average recommended stock weightings rose to 81.3 percent from 81.1 percent a month earlier, according to a poll of eight China-based fund managers conducted last week.

    Funds cut allocations to bonds to 3.9 percent from 6.2 percent, while increasing allocations to cash to 14.9 percent from 12.7 percent.

    “My concern now is that the economy continues to slide, which may cause changes to the fundamentals of many industries,” said a fund manager based in southern China who declined to be identified.

    China’s manufacturing engine contracted in the first quarter of 2014, a preliminary private survey showed last week, raising market expectations of government stimulus to arrest a loss of momentum in the world’s second-largest economy this year.

    Weak economic indicators have prompted many international investment banks to lower their 2014 China growth forecasts. Royal Bank of Scotland Group trimmed its prediction for gross domestic product growth to 7.7 percent from 8.2 percent in the middle of March.

    The CSI300 index of the leading Shanghai and Shenzhen A-share listings has lost more than 7 percent so far this year as concerns about China have mounted.

    Most respondents to the poll said that China’s slowing economy was a near-term concern, while some considered imminent bond defaults and the liberalization of interest rates to be priorities.

    China saw its first domestic bond default earlier this month, when Shanghai Chaori Solar Energy Science and Technology Co. failed to make an interest payment on a bond it issued in 2012. (SD-Agencies)