A total of 56 listed companies were approved by the China Securities Regulatory Commission (CSRC) to inject assets by issuing new shares from June 2006 to February 2007. According to the latest statistics compiled by the China Securities Journal, the share price of these 56 companies increased 98 percent on average, more than the 79 percent jump of the Shanghai Composite Index in that time.

Nearly all the low-priced stocks began rising in the first two months of trade after Spring Festival, much faster than the price increase of large-capitalization stocks in the financial and manufacturing sectors.

Zhou said mutual funds had gradually shifted part of their investment to low-priced, small-capitalization stocks from the large-capitalization ones.

Liu Zhenghua, an analyst from Changjiang Securities, said that other than concept stocks, fund managers also favored retail stocks. "Many mutual funds plan to shift their investment to the retail sector because of the potential of China's consumer market," said Liu.

According to Investoday's survey, most fund managers said stocks in the communication and medical sectors would gain in the next six months. Stocks in the financial, scientific and energy sectors would remain stable and about 22 percent of fund managers said stocks in the car industry would be slower than the stock market's growth rate.