Stocks in Shenzhen were barreling toward their best month in more than eight years, while Tokyo's market was headed for its longest streak of gains since the heady days of 1988.

The extended strong performances around the region are starting to put investors on guard, especially in China, where the startup valuations are considered seriously stretched.

Asia was broadly tracking the U.S., where the Nasdaq Composite rose to a record overnight. A semiconductor deal between Broadcom Corp. and Avago Technologies Ltd. provided a boost for the sector there and in Asia helped Taiwan Semiconductor Manufacturing gain 0.7%.

The Shenzhen Composite Index, tracking performance on the smaller of China's two mainland stock exchanges—where many technology firms trade—was up 0.9% on Thursday. It is on track to gain nearly 30% this month alone, on par with its pace of April 2008, just before the market headed toward a downturn.

Along with the larger Shanghai market, Shenzhen has been buoyed by the prospect of further stimulus from Beijing as well as measures that will allow in more foreign capital in.

The Shanghai Composite Index was down slightly in Thursday trading, at 4935.07—still within reach of 5000, considered a key psychological barrier, not breached since January 2008.

In Japan, the Nikkei Stock Average was up 0.6%, gaining for an 11th straight day as the weaker yen encouraged investors.

Central-bank policies have buoyed sentiment globally, but poor growth and stretched valuations should weigh on assets, says Matthew Sherwood, head of investment strategy at Perpetual Investment Management. "Earnings growth is subdued, credit spreads are tight and China is still slowing," he adds.

The Hang Seng Index was down 1% at 27806.69, despite better industrial profits data in China. Industrial profits in April were up 2.6% from a year earlier, compared with a 2.7% decline in the first quarter.

"We believe the better industrial-profit data in April showed that policy easing has probably been gradually showing its effect," says Goldman Sachs. "However, the improvement in industrial profits was partially reflecting corporates' higher investment returns from a strong financial market."

Sunac China Holdings shares were down 3%, as trading resumed following a nearly two-week suspension. Sunac said it will no longer buy a stake in troubled property developer Kaisa Holding Co.

Jacky Wong contributed to this article.

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