SHANGHAI, March 22 (Reuters) - The Shanghai, Shenzhen and Hong Kong stock exchanges are coordinating supervision over illegal trading activities as speculative Chinese money is flowing into Hong Kong via the stock connect schemes to skirt rules on the mainland, the official Shanghai Securities News reported on Wednesday.
Chinese money was blamed for volatility in Hong Kong-listed Meitu Inc, whose shares surged as much as 28 percent on Monday, before reversing to end down 11 percent.
Meitu, most famous for its popular app that transforms users' selfies into adorable characters, was the most-traded stock under both the Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect on that day, exchange data showed.
The newspaper said speculative money from China is targeting Meitu because the company is in a "sexy" sector, there are not yet shorting tools against the stock in Hong Kong and the company will soon publish earnings results.
The Shenzhen Stock Exchange has improved its supervision system and is closely monitoring money flows under the connect scheme in a bid to spot unusual trading behaviors, the paper said.
Last November, China's securities market regulator said it had punished an investor for conducting what it called "illegal" cross-border trading through the Shanghai-Hong Kong Stock Connect scheme. The case was the first of its kind and involved more than 40 million yuan ($5.8 million) in illicit gains.
Reporting by Samuel Shen and John Ruwitch; Editing by Jacqueline Wong