Hedge Funds Bet Big on Asian Stocks, Led by China and Hong Kong
Goldman Sachs reports a surge in hedge fund optimism towards Asian stocks, reaching its highest level since 2016. As of February 20, long positions outnumbered short positions by a 1.5:1 ratio.
China and Hong Kong accounted for almost half of the regional inflows, with Japan, Taiwan, and Australia also contributing significantly.
Hong Kong and China's Outperformance
The MSCI AC World Index has been outpaced by Asia, as hedge funds reduce exposure to North America.
Hong Kong and China A-shares have outperformed global markets due to the rise of DeepSeek and the resulting tech rally. The Hang Seng Index has hit a three-year high, while its sub-tech index has recorded six consecutive weeks of gains.
Stocks like Alibaba Group have surged by over 60% year-to-date.
Concerns and Sell-Offs
The bullish sentiment has raised concerns about excessive optimism over China's recovery and the U.S.-China rivalry.
Hong Kong and China shares experienced sell-offs after the Trump administration announced its "America First Investment Policy," aimed at restricting China.
Hang Seng Index Caution
CICC Research strategist Kevin Liu advises investors to consider profit-taking at the Hang Seng Index level of 23,000-24,000, as sentiment and technical indicators may be overheated.
