Chinese fund managers cut stock holdings to nine-month low as policy and valuation risks abet US$32.4 billion loss

Name: China’s economy accelerated at end of 2020, but virus-hit annual growth lowest in 45 years
Uploaded: 2021-04-28T08:19:40.000Z
Duration: 1 min 33 s
Description: China’s economy accelerated at end of 2020, but virus-hit annual growth lowest in 45 years

Holdings slipped to 75.9 per cent of stock-focused mutual funds’ total assets in the first quarter, the lowest since June, according to Bohai Securities

Zhang Kun, China’s biggest fund manager, cut the holdings of Chinese baijiu stocks by 10 percentage points as popular ‘stampede bets’ unwound

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An electronic board displaying the stock index and prices at a securities brokerage in Beijing. Photo: EPA-EFE

Zhang Shidong

Published: 4:19pm, 28 Apr 2021Updated: 4:19pm, 28 Apr 2021

China’s stock-focused mutual funds trimmed their positions last quarter to the lowest level since June as money managers took shelter from the twin threats of policy tapering and valuation excesses that undermined “stampede bets”.

The average equity holdings dropped to 75.9 per cent of the total assets in the industry, according to Bohai Securities, a 2.1 percentage points drop from the end of 2020 when the size of the industry topped 21 trillion yuan (US$3.24 trillion).

Onshore fund managers added banking and chemical stocks to catch the benefit from economic reflation as China’s growth recovery strengthened. They pared consumer and manufacturing stocks, two of the more popular sectors for institutional investors over the past year.

The first-quarter fund holdings offer an insight into how the nation’s biggest money managers have readjusted their strategies and portfolio with a multitude of challenges as tightening credit, antitrust scrutiny and geopolitical risks have begun to squeeze returns.

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China’s economy accelerated at end of 2020, but virus-hit annual growth lowest in 45 years

While mutual funds delivered 2 trillion yuan of income to investors in 2020, they have had a poor start to 2021 by incurring a combined loss of 210 billion yuan in the first quarter, according to data published by TX Investment Consulting. The CSI 300 Index of China’s biggest onshore stocks fell 3.1 per cent in the period. They made no money in the final quarter of 2020.

“There was an obvious shift of investment style in the first quarter,” said Cao Chunxiao, an analyst at Huaxi Securities. “Cyclical stocks gained favour among mutual funds” because the economic recovery from the pandemic gained further traction, he added.

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