Chinas No 1 Hedge Fund Manager Arrested in Insider Trading Investigation

Police arrest Chinas no 1 hedge fund manager Xu Xiang in insider trading investigation.

Xu Xiang-1Police and regulators have had their eyes on Xu Xiang, hedge fund manager of Zexi Investment. Xu Xiang has been regarded by many as China’s No 1 hedge fund manager. The losses caused by the chaos in mainland stock markets this summer climbed into trillions of dollars.

And now they have pounced. Xu and several other executives of Zexi were arrested on Sunday on charges including insider trading and stock market manipulation, Xinhua reported yesterday.

Many had thought Xu was in the clear after an earlier interrogation by regulators over suspicious trades following the boom-to-bust cycle in the A-share market in mid-June.

The detention of Xu, whose aura on the mainland is akin to that of Warren Buffett in the West, is the latest crack to appear in the country’s securities industry.

Hedge fund manager said Xu was well-connected with senior government officials and a “cunning” asset manager who could fully take advantage of regulatory loopholes to profit.

“It was widely believed that he was safe after being interrogated,” the fund manager said. “He understands the rules better than any other fund manager and it should have been difficult for police to spot his illegal behavior.”

Zexi’s hedge funds recorded at least 140 per cent growth in net asset value this year, making the company controlled by Xu the standout performer in the mainland’s securities industry.
“He was viewed as the best of the best before the investigation into him was announced,” said Zhou Ling, a hedge fund manager at Shanghai Shiva Investment.
“It was the inside information and conspiracy that helped him to make a killing.”

The benchmark indicator jumped nearly 120 per cent between October 2014 and mid-June 2015 before slumping more than 32 per cent in three weeks.

Beijing shelled out more than 1 trillion yuan (HK$1.22 trillion) in rescue funds to underpin the falling market, but in vain.

In recent months, more than a dozen powerful industry figures including Zhang Yujun, an assistant chairman of the China Securities Regulatory Commission, and Cheng Boming, president of Citic Securities, the mainland’s largest brokerage, have been taken away for investigation.

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