Shares in China’s Evergrande plunge after employees’ arrest

HONG KONG, China  -Shares in Chinese property giant Evergrande plunged by around 25 percent as markets opened in Hong Kong on Monday, following the arrest of several of the debt-ridden company’s employees in China.

Evergrande’s stock price dipped to 0.47 around 9 am in Hong Kong (0100 GMT) on Monday, before ticking back up, after closing at 0.62 Hong Kong dollars on Friday.

The drop comes two days after police in the southern Chinese city of Shenzhen said in a statement that several employees of Evergrande’s financial subsidiary, Evergrande Wealth Management, were arrested.

The authorities did not specify the number of employees or the charges against them.

The statement called on the public to report any cases of suspected fraud.

Evergrande, the world’s most-indebted property developer with an estimated debt of $328 billion (307 billion euros) at the end of June, has been at the center of China’s deepening market crisis, raising fears of a global spillover.

READ: Evergrande’s liabilities, depleted coffers raise business viability concerns

Once a star player in an industry key to China’s economic growth, Evergrande’s enormous debt has been seen by Beijing as an unacceptable risk for the country’s financial system.

READ: Contagion fears spread as China property sector cash crunch intensifies

Authorities have gradually tightened developers’ access to credit since 2020, and a wave of defaults have followed — notably that of Evergrande.

On Friday, China’s national financial regulator greenlighted a takeover of Evergrande’s insolvent insurance subsidiary, Evergrande Life Insurance, by new state-owned vehicle Haigang Life Insurance.