China Evergrande shares fall 25% after wealth management employees are detained

HONG KONG (Reuters) – Shares of Chinese developer China Evergrande Group (3333.HK) fell 25% on Monday after police detained some employees at its wealth management unit, signaling a new investigation that could add to the real estate company’s woes.

Evergrande, the world’s most indebted real estate developer, is at the heart of China’s real estate sector crisis, which has seen a series of defaults since late 2021, shaking global markets and raising fears of the spread of infection. Trading in the company’s shares was suspended for 17 months until August 28.

During protests by disgruntled investors at Evergrande’s headquarters in Shenzhen in 2021, Du Liang was identified by employees as the general manager and legal representative of Evergrande’s wealth management division.

“Recently, public security organs took mandatory criminal measures against Du and other suspected criminals in Evergrande Financial Wealth Management Co,” police in the southern city of Shenzhen said in a statement on social media on Saturday evening.

Reuters was unable to confirm that Doe was among those arrested, and the police statement did not specify the number of people detained, the charges, or the date of their detention.

Evergrande did not respond to a request for comment on the police actions.

The stock fell as much as 25% to HK$0.465 in early morning trading, its lowest level in two weeks. It pared losses by 0200 GMT, down 11%, lagging a 0.9% decline in the broader Hang Seng Index.

Last month, the Chinese developer recorded a net loss of 33 billion yuan ($4.5 billion) from January to June, compared to a loss of 66.4 billion yuan in the same period of the previous year.

Earlier this month, Evergrande said it postponed a decision on its external debt restructuring from September to next month to allow its debt holders more time to consider the restructuring plan.

($1 = 7.2799 Chinese yuan)

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