DOMESTIC fund managers said they would raise the proportion of their portfolios invested in stocks over the next three months, marking a bounce from a 21-month low in May as sentiment rose on an expected loosening of liquidity, according to a recent poll.

    Fund managers said China’s central bank’s reduction of reserve requirement ratios (RRR) for some lenders and the slowing pace of drainage in the money markets were the key factors which would help keep liquidity conditions loose.

    “More intensive stimulus policies are expected in the second half of this year. Together with the reduction of reserve requirement ratios, this has improved investor sentiment and made the probability of a market crash less likely,” said a Shanghai-based fund manager, who declined to be identified.

    Average recommended stock weightings in June rose to 79.4 percent from 76.3 percent a month earlier, according to a poll of nine China-based fund managers conducted last week.

    At the end of May, China cut RRR for some banks by up to 50 basis points if they agreed to lend substantially to small firms and the farm sector. Qualifying banks include China Merchants Bank, China Minsheng Banking Corp. and Bank of Ningbo.

    Funds reduced bond allocations to 6.8 percent in June from 10.4 percent the month before, while allocations to cash rose to 13.8 percent from 13.2 percent.

    There was little change in suggested industry allocations, although recommended weightings for consumer and machinery shares rose slightly.

    The average recommended allocation for consumer stocks rose to 19.8 percent from 19.2 percent last month. Machinery shares rose to 13.3 percent from 12.2 percent over the same period. (SD-Agencies)