(Bloomberg) -- A selling spree of Chinese ADRs by US-based hedge funds intensified this month amid tightening financial conditions, according to Morgan Stanley.

Hedge fund managers sold a net $5.7 billion of American depositary receipts for Chinese companies in February, according to figures from the Wall Street bank. That’s up from $300 million in January, its quantitative strategy team said in a report Monday.

Investor sentiment toward Chinese shares has cooled in February after a sizzling three-month rally triggered by the country’s reopening. The NASDAQ Golden Dragon China Index, which measures Chinese stocks traded in the US, has fallen 15% this month after gaining over 80% since October. 

“Hedge fund managers have been de-grossing since mid-January amid re-tightening financial conditions,” analysts including Gilbert Wong and Laura Wang wrote in the note. “Long duration exposures, in particular Chinese ADRs, were disfavored because of trading technicals and macro backdrop.” 

ADRs connected to Chinese electric vehicle makers and Internet firms were shorted the most, the team added. US long-term investors were also “taking a pause” from adding China exposure and becoming more selective in their holdings.

 “Our fund flows analysis shows that US-based long-only managers have net sold $1.3 billion of Chinese ADRs in February month-to-date, after two consecutive months of net buying of $2.1 billion in total,” the note said. 

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