The top-performing China hedge fund has piled back into property shares, reviving a trade that propelled it to a 46 percent gain in the second half of 2014.

Marco Polo Pure Asset Management has been buying developers, including Poly Real Estate Group Co and Beijing Capital Development Co.

That same trade helped drive the fund's gain in 2014 as China's interest rate cut in November sent the Shanghai Property Index to a 60 percent surge through Jan 5, according to Aaron Boesky, Marco Polo's chief executive officer in Hong Kong.

The first reduction in borrowing costs since 2012 was just the start of a round of monetary easing that will send the Shanghai Composite Index to a gain of about 50 percent this year, according to Boesky. Property stocks led the index's 53 percent rally last year as investors in the $5.1 trillion market bet central bank stimulus will boost the world's second-largest economy from its weakest expansion since 1990.

"We are going to make a new high," Boesky, whose Pure China fund was the top performer in the second half among China-focused hedge funds tracked by AsiaHedge Intelligence, said in an interview in Hong Kong. The government is "going to start making cost of capital cheaper and the economy faster".

The rally in Chinese shares will probably resume after the Lunar New Year holiday ends this week, said Boesky, who oversees more than $100 million.

Property sales will also pick up and investor confidence may get a boost from next month's annual session of the National People's Congress as President Xi Jinping outlines plans to keep the economy growing, said Chris Tang, chief investment officer at Marco Polo.

Equity investors counting on China's monetary stimulus to drive gains are likely to be disappointed as the economy weakens further, according to John-Paul Smith, the founder of Ecstrat, a London-based research firm.

Chinese imports plunged in January by the most in more than five years, a sign of weakening domestic demand, while gauges of manufacturing and services industries fell.

"We will see the market trading somewhere between 10 and 20 percent lower from here," said Smith. "If the market goes higher in the meantime, the correction will be deeper and greater."

Even after its rally, the Shanghai Composite's forward price-earnings ratio is still 15 percent below its decade average. The Shanghai Property Index is valued at 8.3 times estimated earnings, a 42 percent discount from levels during the past 10 years, according to data compiled by Bloomberg.

The housing market is poised to rebound, said Tang, who has been reducing holdings of brokerages to fund the shift toward property stocks.

Shenzhen recorded higher new-home prices in December, the first city tracked by the Chinese government to post an increase in four months, after lower interest rates boosted demand.

Nationwide housing sales slumped 10 percent amid tight credit in the first 11 months of last year, according to government data, forcing developers to cut prices.

While some smaller property companies may still struggle to survive, larger companies are better bets as they have access to cheaper financing and opportunities to buy weaker rivals, Tang said. Poly Real Estate, which has a market value of about $17 billion, has dropped 9.9 percent this year in Shanghai trading after a 97 percent jump in 2014.

China, which also cut banks' reserve requirements this month, is likely to keep reducing those ratios along with benchmark lending rates, according to economists.

Even after the reductions, China's biggest lenders will still have to keep 19.5 percent of deposits locked up. The benchmark one-year lending rate is 5.6 percent, compared with near zero in the United States and Europe.

"China, versus the developed world, is at the opposite end of monetary policy spectrum right now," Boesky said. "This is the first rate cut of what will very likely be many cuts in the next two years."