(Bloomberg) —The Chinese speculators shaking up global commodity markets are switched-on, flush with cash and probably not getting enough sleep.

For the second time this year, trading has exploded on the nation’s exchanges, pushing prices of everything from zinc to coal to multi-year highs and sending authorities scrambling to deflate the bubble before it bursts. Metals brokers described panic earlier this month as the frenzy spread to markets in London and New York, prompting wild swings in prices that show no signs of abating.

While billions of yuan have poured in from herd-like Chinese retail investors who show little regard for market fundamentals, brokers and traders say even more is coming from an expanding army of deep-pocketed hedge funds. They’re chasing better returns in commodities as stocks and real estate fade, often using algorithms and trading late into the night, when markets in London and New York are most active.

“There is no doubt that the price moves and the bigger volumes worldwide are being driven by the Chinese, and by professional speculators and financial players,” said Tiger Shi, managing partner at brokerage BANDS Financial Ltd., which counts several of those funds as clients. “The western hedge funds and institutional investors don’t really know what’s going on. Often they were used to trading macro factors or Fed policy, but now they find they have fewer advantages.”

Shi, previously head of metals in Asia at Jefferies Group LLC and Newedge Financial Inc., estimates that China may have more than 5,000 hedge funds active in commodities. At least 10 manage assets of more than 10 billion yuan ($1.4 billion).

The use of algorithmic trading, in which computers execute multiple orders in milliseconds, is turbo-charging volume and volatility, according to Fu Peng, a portfolio manager at Lianzhan Global Macro Fund Management Co. About a third of activity on Chinese exchanges is executed by automated commands, which generates more volume and greater momentum in the global markets, Shi estimates.

A recent example was on Nov. 11. Copper in Shanghai jumped by the most since trading began in 2004 amid a surge in volume. On the London Metal Exchange, it gained as much as 7.6 percent, before sinking 1.7 percent in the Asian evening. The gap between the day’s high and low was more than $500, the widest in five years, and the intensity of the swing was just as big in New York futures.

“I can recall only two other occasions in my career where there was such panic and devastating price action in copper but this market today is far less transparent,” Matthew France, head of institutional sales for metals in Asia at Marex Spectron Group, said in an e-mailed report on Nov. 14. “The machine component in the market is now so much bigger as is the onshore retail and fund involvement on the Shanghai Futures Exchange and OTC options.”

The country’s biggest hedge funds include DH Fund Management Co., Shanghai Discovering Investment Co. and Shanghai Chaos Investment Group. Officials for all three declined to comment for this story.

Over less than two weeks this month, the value of daily transactions on China’s three commodity exchanges more than doubled to peak at $226 billion on Nov. 14. Sparked by speculation that government reforms are helping reduce oversupply of raw materials amid signs of improving demand, Chinese money is pouring into commodities as investors look for better returns than other assets including stocks or real estate, according to Fu at Lianzhan Global Macro Fund Management.

“The nation’s supply-side reforms had a big impact on the market balance, and that’s the fundamentals behind the trading,” Fu said by mobile phone from Hong Kong. “But at the same time, we’ve got too much money there. There have been no returns from investment in industries. The stock market is neither dead nor alive. Investment in real estate also got curbed. So all the money is rushing into commodities.”

For a story on how hot money is flowing back into commodities, click here

The Bloomberg Commodity Index has returned 8.8 percent this year compared with a 7.2 percent drop in the Shanghai Composite Index of equities, and the government has imposed measures to cool the country’s real estate market.

“Commodities market volatility is liquidity driven, as money from commercial bank wealth management products and private banking accounts flow into the market seeking higher return,” said Li Yulong, chief investment officer at Jyah Asset Management, a mutual fund which overseas more than 9 billion yuan.

Chinese traders are often most active during the night session, when trading also typically peaks on the LME and on Comex in New York. On almost two-thirds of the past 30 trading days, copper trading was heaviest between 9 p.m. and 11 p.m. in Shanghai, bourse data show. Analysis of volume and open interest suggests they typically hold contracts for only a few hours.

Similar to the last frenzy in April, the government-owned exchanges have stepped in to cool trading by raising fees and margins, or cutting the number of new positions allowed daily. Volume and turnover have since come off their highs but prices are still swinging. Copper is poised for its biggest monthly advance in a decade in London and Shanghai. Zinc rose to its highest in more than nine years, while lead jumped to the most in five years on the Shanghai Futures Exchange amid record volume.

“The massive and unprecedented surge in Chinese trading volume in base metals over the past month — but especially since the election — has put LME metals traders on red alert,” Tai Wong, director of commodity products trading at BMO Capital Markets in New York, said in an e-mail. The price moves caused by Chinese traders make “a strong argument that the Middle Kingdom is once again the center of the world, at least for metals,” he said.