XU XIANG, the manager of top-performing Zexi Investment, one of China’s largest private money managers, has been detained by police, the Ministry of Public Security said.

    A brief statement issued yesterday through Xinhua News Agency said Xu was suspected of illegally obtaining inside information about the stock market and manipulating prices.

    Shanghai police raided Zexi on Sunday, taking away computers and other materials, according to a person familiar with the matter, in the latest attempt by Chinese authorities to crack down on strategies blamed for exacerbating a US$5 trillion stock-market rout.

    Authorities are also seeking the arrest of suspects who fled overseas, according to the report.

    The government is targeting sophisticated traders amid accusations that their strategies worsened the stock sell-off. The nation was home to the world’s most active futures market until policymakers raised margin requirements, tightened position limits and announced investigations into “malicious” short sellers.

    The Shanghai-based Zexi managed four funds that are among China’s top-10 hedge funds in the June to August period.

    Xinhua said Xu and several other unnamed individuals had been placed under “coercive measures” over recent days, which include summons by force, bail, residential surveillance, detention and arrest.

    China’s securities regulator released draft rules last month that would increase its oversight of algorithmic trading. Those who use automated orders to buy and sell stocks would need to report certain information and wait for a review before they’re allowed to execute their strategies. Orders shouldn’t originate from offshore computers or domestic systems that are controlled from overseas, according to the China Securities Regulatory Commission’s proposal.

    (SD-Agencies)

    (Related story on P4: 3 arrested for futures manipulation)