China Evergrande shares sink 25% after wealth unit staff detained

HONG KONG (Reuters) -Shares of embattled developer China Evergrande Group plunged as much as 25% on Monday after police detained some staff at its wealth management unit, suggesting a new investigation that could add to the property company’s woes.

Evergrande, the world’s most indebted property developer, is at the centre of a crisis in China’s real estate sector that has seen a string of defaults since late 2021 that have rattled global markets and sparked fears of contagion. Trading in the company’s stock was suspended for 17 months until Aug. 28.

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

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

Reuters could not confirm that Du was among those detained, and the police statement did not specify the number of people detained, the charges or the date they were taken into custody.

The wealth unit was an indirect wholly owned subsidiary, and the imposition of criminal coercive measures on the staff members was in accordance with the law which would not affect the company’s operations, Evergrande said late on Monday in a filing to the Hong Kong Stock Exchange.

It also said it noticed media reports on the transfer of its insurance business and the corresponding assets and liabilities to a state-backed company. The transferred unit, Evergrande Life Insurance Co., Ltd, was a 50%-owned investee company, and the transfer had no significant impact on Evergrande’s current operations, the filing said.

The stock fell as much as 25% to HK$0.465 in early trading, the lowest in two weeks. It pared losses in the afternoon and ended down 1.6%.

Last month, the Chinese developer posted a January-June net loss of 33 billion yuan ($4.5 billion), versus a 66.4 billion yuan loss in the same period the previous year.

Earlier this month, Evergrande said it had delayed making a decision on offshore debt restructuring from September to next month to allow holders of its debt more time to consider its restructuring plan.

($1 = 7.2799 Chinese yuan renminbi)

(Reporting By Donny Kwok and Xie Yu, Editing by Anne Marie Roantree, Muralikumar Anantharaman, Lincoln Feast and Bernadette Baum.)