The detention of “kamikaze” China hedge fund manager Xu Xiangfor alleged insider trading after a manhunt was front page news, but to industry insiders it was a downfall foretold

The detention of “kamikaze” China hedge fund manager Xu Xiangfor alleged insider trading after a manhunt was front page news, but to industry insiders it was a downfall foretold

Renowned as “captain” of the “Limit-up Kamikaze Squad”, a loose-knit group of fund managers centred on the port city of Ningbo, Mr Xu favoured bets that were big, bold and bountiful

The squad’s nickname salutes its ability to push stocks up by the 10 per cent daily limit imposed by China exchanges. “

In a market where many investors believe riches elude those who play by the rules, Mr Xu’s Zexi Investment Management

Five of Zexi’s products ranked among the top 20 in China by total return in 2015, with one taking the top spot. Its Series 1 fund has returned 3,270 per cent since launching in 2010

A hedge fund manager in Shanghai said: “Xu’s getting caught was just a matter of time. It just came a bit earlier than expected.”

Despite being ranked China’s 188th wealthiest person on the Hurun Rich List, with worth estimated at Rmb14bn ($2.2bn), little is known about the low-key Mr Xu, pictured right, and his fellow kamikazes. Until Sunday, no confirmed photos of him were available online

But media reports and interviews with fund managers paint a portrait of the squad as investors willing to operate at the frontiers of legality — and sometimes beyond — in the wild west of China’s capital markets

from those in other places,” says Hua Xiuping, finance professor at University of Nottingham Ningbo. “Their appetite for risk is high. This spirit has benefited entrepreneurship in Ningbo, but the love of gambling isn’t good for the

Mr Hua says that compared with other places, Ningbo investors are focused on short-term gain. “Research, buy in, sell out. Everything is quick.” “

In 1993, an 18-year-old Mr Xu abandoned studying for China’s ruthlessly competitive university entrance exam, and borrowed several hundred thousand renminbi from his parents to play the markets, according to Caixin, a financial magazine that interviewed him in 2012

By the late 1990s he and associates from Ningbo had earned the “Limit-up Kamikaze” moniker for their penchant for high-stakes bets. Other traders began monitoring buy orders coming from the Galaxy Securities trading hall on South Liberation Road in Ningbo for clues about which stocks the squad favoured

Among his fellow kamikazes was Ye Qingjun, chairman of Dunhe Investment

, known as “China’s George Soros” for parlaying a Rmb100,000 mortgage on his home in 2003 into a Rmb10bn fortune, starting with a bet on soya beans. “

Mr Ye gained attention earlier this year when China funds including Dunhe took big short positions in copper futures, a bear attack that traders said was “beautifully” timed

“If you think American traders are aggressive, these guys are three times as big and as fast and crazy,” said a trader at the time. “It’s like they’re on speed.”

Not all the kamikazes’ trades went smoothly. In 2007 Zhou Jianming, an associate of Mr Xu from Ningbo, was fined Rmb3.5m for illegal trading practices. China’s securities regulator accused Mr Zhou of submitting buy orders, which he then promptly cancelled — “ spoofing” aimed at fooling other investors into buying on the back of perceived strong demand. 2012

The kamikazes found ways of putting the attention they attracted from other investors to advantage, using it to influence herd behaviour in a market where psychology often trumps fundamentals

Mr Xu and his associates were known for their skill at da pan — “pound the board” — a technique akin to “pump and dump”, though the Chinese term does not necessarily imply illegality. The practice is especially easy with smaller, illiquid stocks. Once other investors poured in, the kamikazes sold at a profit

in early 2012 just after the stock had fallen from Rmb83 to Rmb20 in a few days. The stock had rocketed after the company announced, improbably, that it had stumbled on a potential hepatitis-B vaccine

The price collapsed after an announcement that further research had failed. Zexi bought in at the low point, drawing in other buyers in its wake. Mr Xu sold out at about Rmb35; within weeks the stock fell again

Mr Xu eschewed the “kamikaze” label. “‘Limit-up Kamikaze’ was hyped up by the media,” he told Caixin in 2012. “The [securities regulator] has never investigated us. This phrase isn’t based on evidence.”