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China hedge fund scandal claims its first victim

By NexChange
Hedge Funds


The arrest of “China’s Warren Buffet”, AKA hedge fund guru Xu Xiang, has battered both his reputation and his investments. One of biggest losers this week was consumer goods company China Seven Star which saw its share price plummet following Xiang’s arrest for insider trading on Sunday.

Barron’s Asia reports the the company saw its share price slump by nearly 40% on Tuesday morning, from 1.29 Hong Kong dollars on Friday,  to 0.75 following a trading halt on Monday. The stock, which rallied 369% this year until Friday, has since a recovered to 0.98.

Xiang is the company’s second largest stakeholder with a 9.7% share. China Seven Star said in a filing it tried to contact Xu unsuccessfully.

According to South China Morning Post, Xiang, was widely believed to be safe after being interrogated earlier this year. His firm, Zexi Investment, saw its hedge funds record at least 140% growth in net asset value for 2015. Zhou Ling, a hedge fund manager at Shanghai Shiva Investment, told the paper.

"He was viewed as the best of the best before the investigation into him was announced. His detention shows there is no God in this market at all.”

Photo: Phillip Taylor

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