China Freezes $1 Billion of Shares as Fund Boss Xu Probed

Updated on
  • Xu investigated for insider trading, stock manipulation
  • Corruption checks underway across China's financial industry

Chinese police have frozen $1 billion of shares in listed companies as authorities probe Xu Xiang, one of the nation’s best-known hedge fund bosses, for alleged insider trading and stock manipulation.

In one of the latest moves, authorities slapped a two-year freeze on 90 million shares Xu’s Zexi Investment holds in Shanghai-based developer Deluxe Family Co., according to a stock-exchange statement from Deluxe on Tuesday night. At yesterday’s closing price, that stake was worth 1.16 billion yuan ($182 million.)

Xu, known in China as “hedge fund brother No. 1,” is one of the targets in a wave of investigations as the government tries to assign blame and clean up the market after a summer stock rout. He was detained on the highway between Shanghai and Ningbo on Nov. 1, China National Radio reported.

In the eastern city of Ningbo, another firm also reported a lock-up, adding to restrictions earlier imposed on stakes held by Xu’s mother, Zheng Suzhen. Zheng hasn’t been named by the authorities as being under investigation. The total value of stakes frozen in four companies is $1 billion, based on Tuesday’s closing prices.

More Freezes?

Shen Meng, a Beijing-based director at Chanson & Co., an investment bank, said that the numbers could get bigger, with more share freezes following as authorities continue their investigations.

No comment has been available from Xu, whose firm Zexi managed four of China’s top-10 performing hedge funds between June and August, according to Shenzhen Rongzhi Investment Consultant Co. He couldn’t be contacted on Wednesday through calls to his mobile phone number and to Zexi’s offices in Shanghai and Beijing.

On Tuesday night, department-store firm Ningbo Zhongbai Co. told Shanghai’s stock exchange that the police froze 35 million shares owned by Tibet Zetian Investment Development Co. Bloomberg was unable to contact Tibet Zetian through a telephone number listed on company registration records.

No Contact

In its statement, Ningbo Zhongbai also said that Ningbo Zhongbai’s Chairman Xu Jun and a director of the company, Zhao Yibo, couldn’t be contacted. On Nov. 3, Ningbo Zhongbai had said that it was unable to reach Chairman Xu and its controlling shareholder, Xu Boliang, to verify their personal connections with Xu Xiang.

Corruption checks are taking place across China’s financial industry as the Communist Party’s Central Commission for Discipline Inspection vets regulators, the nation’s biggest banks, and sovereign-wealth fund China Investment Corp. Those checks add to post-rout probes that have snared executives from Citic Securities Co., the nation’s top brokerage, and a senior official at the China Securities Regulatory Commission.

— With assistance by Jun Luo

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