HONG KONG (Reuters) - Hedge funds' willingness to boost bets on Asian stocks last week rose to its highest level on Goldman Sachs record since 2016, the bank said in a note.

Long positions exceeded short positions by a ratio of 1.5 to 1, with China and Hong Kong accounting for nearly half of the regional inflows from February 14 to 20, according to the note this week.

Japan contributed 23% of gross inflows, followed by Taiwan and Australia.

"Asia is now the most overweight region versus MSCI AC World weights," at the expense of hedge funds rotating out of North America, the bank said, based on the hedge fund exposure it tracks.

Hong Kong and China A-share markets have outperformed global peers in the past month, as the emergence of DeepSeek fuelled a tech rally and ignited animal spirits, driving Hang Seng Index to a three-year high at 23688.45. Its sub-tech index has advanced for six straight weeks.

Hot stocks such as Alibaba Group ( BABA ) surged over 60% year-to-date.

The extreme bullishness has led to some concerns that there is too much optimism over China's recovery and the U.S.-China competition.

Both Hong Kong and China shares suffered sell-offs this week after the Trump administration issued the "America First Investment Policy", which aims to enhance restrictions on China.

Kevin Liu, a strategist at CICC Research, suggested investors take some profits around the 23,000-24,000 level for the Hang Seng index, as sentiment and technical indicators look overextended.