SHANGHAI, April 25 (Reuters) - Mainland China and Hong Kong stocks edged higher on Thursday, as market sentiment improved after strategists from global investment houses upgraded their views on Chinese shares.

** HSBC said on Thursday that its funds have built significant exposure to mainland China equities.

"Global emerging market (GEM) funds have rolled back on their underweight on mainland China and turned neutral, while Asia's funds exposure on the market is now at a seven-month high," strategists at HSBC said in a note.

** Earlier this week, UBS analysts forecast foreign investors would gradually return to China's market via the Stock Connect as market sentiment and the macro environment improve. The bank's strategists upgraded MSCI China equities to "overweight". ** At the midday break, the Shanghai Composite index was up 0.17% at 3,049.90 points. ** China's blue-chip CSI300 index was up 0.24%, with its financial sector sub-index higher by 0.59%, the consumer staples sector down 0.2%, the real estate index up 1.07% and the healthcare sub-index up 1%. ** Chinese H-shares listed in Hong Kong rose 0.47% to 6,129.01, while the Hang Seng Index was up 0.55% at 17,295.93. ** The smaller Shenzhen index was up 0.45%, the start-up board ChiNext Composite index was higher by 0.33% and Shanghai's tech-focused STAR50 index was down 0.21%. ** Around the region, MSCI's Asia ex-Japan stock index was weaker by 0.47% while Japan's Nikkei index was down 2.01%. ** The yuan was quoted at 7.2469 per U.S. dollar, 0.01% weaker than the previous close of 7.2461. ** The largest percentage gainers in the main Shanghai Composite index were Ninebot Ltd, up 16.94%, followed by Arctech Solar Holding Co Ltd, gaining 11.81%, and Jiangsu Yabang Dyestuff Co Ltd, up by 10.21%. ** The largest percentage losers in the Shanghai index were XiAn Qujiang Cultural Tourism Co Ltd, down 10%, followed by Zhejiang Biyi Electric Appliance Co Ltd, losing 10%, and Zhejiang Yingfeng Technology Co Ltd, down by 9.928%. (Reporting by Shanghai Newsroom; Editing by Mrigank Dhaniwala)