Shares of China Evergrande Group dropped after some staff members from its wealth-management unit were detained by police in southern China. The debt-laden developer’s shares fell by as much as 24% before bouncing back and trading higher.
Investigation and Detention
In a recent WeChat post, the Shenzhen city police announced that they had taken “criminal compulsory measures” against Du and other suspected criminals at Evergrande Financial Wealth Management Co. The police have encouraged the public to report any instances of suspected fraud. The investigation is ongoing, but no further details regarding the number of detained employees or the charges against them have been disclosed.
Protest and Asset-Disposal Issues
Du Liang, identified as the head of Evergrande’s wealth-management unit, was mentioned during protests at the company’s Shenzhen headquarters in September 2021. The wealth-management unit had previously stated that their asset-disposal progress was not going as planned and that they were unable to make repayments for the month of August due to a lack of asset-disposal funds.
Takeover of Insurance Unit
China’s National Administration of Financial Regulation has approved the takeover of Evergrande’s insurance unit by a newly established state-owned insurer. This decision aims to address the financial challenges faced by Evergrande.
Debt and Restructuring
China Evergrande defaulted in 2021, with total liabilities amounting to 2.39 trillion yuan (US$328.53 billion) as of June. The company has expressed its commitment to expedite the restructuring of offshore debts and protect the long-term interests of its creditors.
Volatility in Share Price
Since resuming trading on August 28, China Evergrande Shares have experienced significant volatility. Following its trade resumption, the stock plummeted by 79%. However, it quickly rebounded the following week, surging by a record-breaking 83% after a state media report suggested that Beijing might implement new measures to support the property sector.
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