HONG KONG, April 30 (Reuters) - Asian hedge funds

tiptoed back into the market last week, adding to their

positions in Japan and India shares, after quickly cutting

exposure when U.S. President Donald Trump unleashed sweeping

tariffs at the start of the month, Morgan Stanley ( MS ) said.

They were also buyers in Taiwan, mainly driven by short

coverings, but reduced positions in Australia and China, the

prime brokerage note sent to clients on Tuesday shows.

Japan and India stood out when global investors struggled to

find cover amid the market turmoil and a loss in confidence in

U.S. assets.

Japan's benchmark Nikkei 225 has already recovered

all the losses since Trump unveiled his "Liberation Day" tariffs

on April 2, and is slightly up this month; Indian stocks were

among the first in the world to bounce back from losses, with

the NIFTY 50 rising more than 3% this month.

Investors are betting on these countries to successfully

negotiate a trade deal with the United States after the Trump

administration's 90-day pause on tariffs for most countries

except China.

Hedge funds snapped up materials, tech, and industrials

shares in Japan, Morgan Stanley ( MS ) said, but in China, they mainly

sold or added bearish bets against consumer discretionary

stocks.

Washington raised tariffs on China to 145% in April,

prompting China to retaliate with 125% levies on U.S. imports,

escalating a trade war between the world's two largest

economies.

Economists believe the macro data in China will show

weakness in the second quarter due to trade war damage.

A separate note by Goldman Sachs showed Chinese equities led

the net selling flow by hedge funds in Asia for the month until

April 24. The selling was focused on Hong Kong and U.S.-listed

Chinese shares.

Although Asian hedge funds' leverage level is recovering, it

is still "far below pre-tariff selloff levels", Morgan Stanley ( MS )

said.