Hedge funds ramped up bets on Asian stocks last week at their highest level on record since 2016, with China and Hong Kong accounting for nearly half of the regional inflows, according to a report by Reuters citing a note from the prime brokerage desk at Goldman Sachs.
Between 14 and 20 February, long positions in Asian equities outnumbered short positions by a ratio of 1.5 to one. Japan made up 23% of total inflows, while Taiwan and Australia also saw notable increases.
Goldman Sachs noted that Asia is now the most overweight region compared to MSCI AC World index weights, as hedge funds rotate out of North America in search of opportunities.
Hong Kong and China’s A-share markets have outperformed global peers in the past month, driven by a tech rally sparked by DeepSeek’s emergence. The Hang Seng Index surged to a three-year high of 23,688.45, while its sub-tech index extended gains for a sixth consecutive week.
Among the top performers, Alibaba Group (9988.HK) has soared over 60% year-to-date.
While optimism around China’s recovery has fuelled momentum, some analysts warn of overextended sentiment.
This week, Hong Kong and Chinese stocks saw sell-offs following the Trump administration’s “America First Investment Policy,” which introduced stricter investment restrictions on China.
Kevin Liu, a strategist at CICC Research, advised investors to take profits around the 23,000-24,000 level for the Hang Seng Index, citing overstretched sentiment and technical indicators.
