Shares in the crisis-hit China Evergrande have plunged by up to a quarter after the apparent detention of staff by police.
The company, which is the world’s most indebted property developer, has been at the centre of a financial crunch covering the wider real estate sector in China since 2021.
Trading in the loss-making company’s stock was suspended for 17 months, until late August, amid a string of defaults and the creation of a restructuring plan that is yet to be agreed with its creditors.
Shares opened 25% lower in Hong Kong on Monday following the release of a statement by police in the southern city of Shenzhen over the weekend that revealed apparent action against a senior figure within Evergrande’s wealth management arm, Du Liang, and others.
It read: “Recently, public security organs took criminal compulsory measures against Du and other suspected criminals at Evergrande Financial Wealth Management Co.”
There was no further information on whether Du, or further people, had been detained but it was widely believed that a number of individuals were likely to be in custody.
While the company’s embattled share price later recovered some poise towards the close, the initial reaction reawakened concerns about the state of the company and China’s wider property sector.
Evergrande’s liabilities were shown, in May, to total $127bn (£103bn).
Dozens of companies have suffered on the back of writedowns on properties, return of lands, losses on financial assets and steep financing costs.
The woes have had a stinging impact on the wider Chinese economy and contributed to bolstered economic stimulus by authorities who have been grappling a collapse in consumer demand.
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Susannah Streeter, head of money and markets at Hargreaves Lansdown, said of the events: “The detention of Evergrande employees, working in wealth management, has prompted a big slide in the real estate giant’s share price amid nervousness that fresh fragilities will be uncovered.
“Authorities are swooping deeper into the internal workings of the company, as worries swirl about the sector’s woes potentially causing pools of financial instability elsewhere requiring fresh patch-ups, which could further drag down economic growth.
Attempts to stem the slowdown in China through stimulus measures do appear to be bearing some fruit with Friday’s data on industrial production and retail sales rising more than expected and there are expectations more help could be on the way.”
