FUND managers in China cut their suggested equity exposure for the next three months to a 33-month low, as most of them were on the defensive amid worries over Sino-U.S. trade war and tight liquidity conditions.

They reduced their suggested equity allocations to 65 percent, the lowest level since September 2015 and down from 70.6 percent a month earlier, according to a poll of eight China-based fund managers conducted last week.

The fund managers have boosted their suggested bond allocations for the coming three months to 15.6 percent from 10.6 percent.

They have also hiked recommended cash allocations to 19.4 percent from 18.8 percent in the previous month.

“The collapse of trade talks between China and the United States was beyond market expectations, while China’s continued deleveraging campaign also aggravated already tight liquidity conditions in the market,” a fund manager said.

The deleveraging effort has driven up borrowing costs for businesses and slowed the economy, and the fear is that any turmoil in the markets could restrict the government’s ability to pump-prime the economy as it tries to mount a defence in the trade battle with the United States.

Overall, the fund managers surveyed held mixed views on asset allocations for the next month, with six recommending the same level of equity exposure, one suggesting an increase, while another one suggesting a cut.

Average recommended allocations for consumer stocks in the next three months rose sharply. Those for financial services shares also edged up, while those for most other sectors fell, indicating fund managers’ defensive stance as they “huddled together for warmth” in defensive plays. (SD-Agencies)