Summary:
- Police in Shenzhen recently detained some of China Evergrande's wealth management staff.
- Unclear charges and the number of people detained make it difficult to assess the situation's gravity.
- China Evergrande is already under significant financial stress and has delayed its decision on offshore debt restructuring.
- The company's woes are at the centre of a broader crisis in China's property sector that has been causing global market jitters.
Shares of China Evergrande, a troubled property developer, dropped on Monday after police detained some of its wealth management staff. This has sparked concerns of further investigations into Evergrande that could worsen its already dire situation.
Embattled Developer China Evergrande Plunges After Staff Detained
Shares of China Evergrande, the embattled developer at the centre of a crisis in China's property sector, plummeted on Monday after police detained some of its wealth management staff. The move suggests a new investigation into the property firm that could add to its long-running woes, including a string of debt defaults since late 2021 that have rattled global markets and sparked fears of contagion.
Police Detain Evergrande Financial Wealth Management Company Staff
On Saturday night, police in the southern city of Shenzhen said in a statement, "Recently, public security organs took criminal compulsory measures against due and other suspected criminals at Evergrande Financial Wealth Management Company". Although the police statement did not specify the number of people detained, the charges or the date they were taken into custody, a person named Du Liang was identified by staff as the general manager and legal representative of Evergrande's Wealth Management Unit during protests by disgruntled investors at Evergrande's Shenzhen headquarters in 2021.
Uncertain Times for China Evergrande
Reuters could not confirm whether Du was among those detained. Evergrande has not responded to a request for comment on the police action. The world's most indebted property developer only resumed trading late August after the Hong Kong exchange suspended its stock trade for 17 months. However, on Monday, its stock plummeted as much as 25 percent in early morning trade. Although the stock regained some ground later in the day, the recent development has raised concerns about the company's uncertain future.
Offshore Debt Restructuring Decision Delayed
Earlier this month, Evergrande announced that it was delaying its decision on offshore debt restructuring to next month to give its debt holders more time to consider its restructuring plan. This comes after the company estimated its liabilities totalled around $300 billion, including debt to banks, suppliers, and investors.
Implications for China's Property Sector
The development raises questions about the future of China's property sector, which is already grappling with a litany of economic and regulatory challenges. The sector has been under scrutiny by Chinese regulators, who have been taking steps to rein in borrowing and leverage in the industry. However, so far, these efforts have not succeeded in calming the markets or preventing defaults. This latest news is expected to escalate jitters in global markets and reinforce concerns about contagion as Evergrande's troubles reverberate throughout China's broader economy.
Conclusion
The detention of Evergrande's wealth management staff further exacerbates the company's already fragile situation and adds to the uncertainty surrounding China's property sector. The recent defaults and investigations have already created ripples in the global markets, and this latest development is likely to further raise concerns about the potential contagion and long-term effects on the Chinese economy.
Evergrande's financial distress and the uncertainty surrounding its future continue to raise concerns among investors and regulators alike.