Chinese stocks are recovering their popularity in global portfolios, with investors adding more than they shorted in eight of the past 10 weeks, Goldman Sachs' prime services weekly report said. The U.S. investment bank said Chinese equities saw the biggest cumulative four week net buying since it started tracking the data.

Early in December, China announced sweeping changes to its zero-COVID policy, loosening rules aimed at curbing the spread of the virus. Some investors expect the new approach will spur economic growth.

Shares in Chinese companies accounted for 13.1% of the global net exposure of funds tracked by Goldman Sachs as of Jan. 19, up from 7.1% in late October, but still below a peak level of 15.3% in July 2020.

China was "by far the most net bought market on the prime book this week," Goldman Sachs' report said, based on its clients' flows. "China is quickly becoming a consensus long idea, in our view."

The MSCI China index has gained 13.55% since the start of 2023.

Analysts at JPMorgan, who also see hedge funds adding Chinese stocks to portfolios, warned in the J.P. Morgan Positioning Intelligence report, seen by Reuters, that some of the positive momentum may wane in the near term, depending on new developments on China's reopening measures. "If the China reopening story continues to gather pace and if we see greater participation across investor types, then perhaps the rally can continue."

JP Morgan and Goldman Sachs did not immediately respond to requests for comment.

Hedge funds that bet on China's reopening and bought beaten-down stocks posted high returns late last year, Reuters showed earlier this month.