(Bloomberg) -- Long-only funds have replaced hedge funds as the main buyers of China’s tech stocks since January, according to Morgan Stanley, as investors remain split on the prospect of further gains.

Net purchases by mutual funds which were previously underweight China were “no longer driven only by portfolio rebalancing but now also reflect net buying to deploy new capital,” strategists including Gilbert Wong wrote in a Feb. 16 note. In contrast, long-short money managers have cut gross holdings since late last month, they added.

Some long-only managers are taking advantage of a recent drop in prices to add exposure to media, e-commerce and health care shares, the strategists wrote. “Yet their sector preference is no longer solely biased to the ‘China reopening’ theme and has turned more selective based on bottom-up fundamentals.”

The shift is taking place as China’s stock rally shows signs of easing, with the Hang Seng Tech Index sliding into a technical correction this week, before pulling back. Geopolitical tensions and uncertainties about the domestic economic outlook are prompting some investors to rethink a trade which has become increasingly crowded.

China’s Rapid-Fire Stock Rally Seen Giving Way to a Slow Grind

As most investors began to look past the reopening theme, their main areas of focus have been China A-shares, prospective leaders in artificial intelligence, and companies that can leverage on AI to improve their financials, according to the strategists.

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