China funds cut equity allocations to six-month low on fears of overheating: Reuters poll

SHANGHAI (Reuters) - Chinese fund managers cut the proportion of their portfolios to be invested in stocks over the next three months to a six-month low, a Reuters poll shows, reflecting concerns that the mainland market may be overheating after a torrid rally.

The benchmark Shanghai Composite Index <.SSEC> has gained over 17 percent so far this year, on top of a 50 percent surge in 2014, as Chinese authorities steadily ease policy and roll out stimulus measures to prevent a sharp economic slowdown.

Chinese fund managers cut their suggested equity allocation for the next three months to 79.4 percent from 83.3 percent, according to a poll of eight China-based fund managers conducted this week.

Funds increased their suggested bond allocation to 10.8 percent from 7.9 percent a month ago, and upped cash weightings to 9.9 percent from 8.8 percent in February.

"The short-term risk is the transition of market habits and any policy changes that may come after the rally," said a Shanghai-based fund manager, who declined to be identified because he is not allowed to speak to the media.

Currently, the only reason for the rally is funds flowing into the market as a result of monetary easing, he added. Indeed, many companies have been reporting weaker earnings and pressure on profit margins as economic growth slows.

This month, suggested allocations to electronics stocks rose to a nine-month high, while those connected to China's plan to build a modern Silk Road, such as transport, infrastructure and machinery, also increased.

China stocks jumped nearly 2 percent to seven-year highs on Monday after Beijing unveiled details of the plan to improve transport links and trade ties from China to Central Asia, Europe and Africa.

In contrast, suggested allocations to consumer and finance stocks fell.

The average recommended allocation for electronics stocks rose to 19.1 percent from 13.1 percent last month, while transport infrastructure and machinery increased to 7.5 percent and 10 percent from 6.7 percent and 8.3 percent, respectively.

The poll was conducted before Beijing's latest easing measures late on Monday. Downpayment requirements on homes were cut for the second time in six months, as authorities step up their fight against sliding house prices which are imperiling the world's second-biggest economy.

(1 US dollar = 6.1143 Chinese yuan)

(Reporting by David Lin; Writing by Engen Tham; Editing by Kim Coghill)