Hedge funds and long-term investors surged into Hong Kong stocks on Tuesday, following the announcement of a broad stimulus package as China looks to revive its ailing economy, according to a report by ZAWYA citing a note from the prime brokerage division at Goldman Sachs.

Describing the rally as an "explosive turnover," analysts predicted that the stock rally could extend over the coming sessions, with investors particularly bullish on Hong Kong stocks, which tend to be more sensitive to interest rate changes.

Chinese markets has their strongest day in years on Tuesday after Beijing introduced its most extensive stimulus measures since the pandemic, including increased funding and interest rate cuts.

According to UBS, the rally was mainly led by Chinese and foreign hedge funds, while long-term overseas investors tracked by the bank largely opted to take profits.

The Hang Seng Index surpassed the 19,000 level for the first time since 28 May, while the CSI 300 Index jumped 4.3%, and the Shanghai Composite Index rose 4.2%.

Hedge funds were aggressive buyers of Hong Kong stocks, contributing to 22% of the flows tracked by Goldman Sachs in the region. Long-only investors became more active later in the day, accounting for 78% of flows.

Turnover in Hong Kong’s market surged by 137% compared to the 20-day average, while turnover in Shanghai and Shenzhen markets increased by 83% and 66%, respectively.

"Positioning in Hong Kong and China is very light for both mutual funds and hedge funds, and we expect this momentum to continue," Goldman Sachs noted.