China Evergrande shares tumble 25% after wealth management employees’ arrest

China Evergrande shares tumble 25% after wealth management employees' arrest
FILE PHOTO: The company logo is seen on the headquarters of China Evergrande Group in Shenzhen, Guangdong province, China September 26, 2021. REUTERS/Aly Song/File Photo

HONG KONG: Shares of embattled developer China Evergrande Group plunged 25 per cent as markets opened in Hong Kong on Monday (Sep 18), following the arrest of several of the debt-ridden company’s employees in China.

Evergrande’s stock price dipped to HK$0.47 in early morning trade, the lowest in two weeks. It pared losses by 10am local time, down 11 per cent, lagging a 0.9 per cent fall in the broader Hang Seng Index .

The drop comes two days after police in the southern Chinese city of Shenzhen said in a statement that several employees of Evergrande’s financial subsidiary, Evergrande Wealth Management, were arrested.

The authorities did not specify the number of employees or the charges against them.

The statement called on the public to report any cases of suspected fraud.

Evergrande, the world’s most-indebted property developer with an estimated debt of US$328 billion at the end of June, has been at the centre of China’s deepening market crisis, raising fears of a global spillover.

Trading in the company’s stock was suspended for 17 months until Aug 28.

Once a star player in an industry key to China’s economic growth, Evergrande’s enormous debt has been seen by Beijing as an unacceptable risk for the country’s financial system.

Authorities have gradually tightened developers’ access to credit since 2020, and a wave of defaults has followed – notably that of Evergrande.

On Friday, China’s national financial regulator greenlighted a takeover of Evergrande’s insolvent insurance subsidiary, Evergrande Life Insurance, by new state-owned vehicle Haigang Life Insurance.

Source: Reuters/gs