Hedge funds became more cautious in Asian markets last week, selling stocks and reducing their risk just before U.S. President Donald Trump’s expected announcement of new tariffs on April 2. According to Morgan Stanley, the biggest sell-offs happened in South Korea, China, and Taiwan. Hedge funds also increased their bets against Japanese stocks. Countries like China, Vietnam, Japan, and Taiwan—known for exporting a lot to the U.S.—are more at risk if new tariffs are introduced.
Big investors are pulling back from tech stocks. Hedge funds now have their lowest exposure to the sector since 2020, and the Nasdaq 100 has dropped 14%. Even the top tech giants, known as the “Magnificent 7,” have fallen by 20%, pointing to a possible tech market downturn.
Goldman Sachs says U.S. hedge funds cut their net leverage by 7% in March 2025, reaching the lowest level since 2016. This shows they’re trying to reduce risk due to rising concerns about market volatility and liquidity.
Stock markets in Japan and South Korea have already fallen 6% and 5% since Trump announced a 25% tariff on imported cars on March 26. Chinese and Hong Kong markets also dropped to one-month lows. Morgan Stanley said Asia-focused hedge funds lost about 0.6% to 0.7% last week, ending March down 0.37% on average. They also reduced their borrowed investment levels from 67% to 61%. Most of the selling came from funds using multiple strategies and those focused on big-picture trends.
