Dusseldorf The shares of the heavily indebted real estate group Evergrande came under heavy pressure on Monday. They temporarily fell by 25 percent after it became known at the weekend that the police in the southern Chinese megacity of Shenzhen had arrested some managers of the group’s asset management division. “Public security organs recently took criminal enforcement measures against Du and other suspected criminals at Evergrande Financial Wealth Management Co.,” the agency said in a post on its official WeChat channel on Saturday.
Apparently, the general director of asset management, Du Liang, is among those arrested. Evergrande could not be reached for comment on Monday.
Police gave no further details about the number of people arrested or the exact charges, but generally urged investors to report financial crimes. Evergrande shares made up for a larger part of their losses over the course of the day.
The company is at the center of China’s real estate crisis. Evergrande got into massive difficulties around two years ago after the real estate bubble in China burst – but a collapse has so far been avoided.
In mid-August of the year, the company applied for protection from creditors in the USA as part of the restructuring in order to arm itself against claims from creditors in the United States. With liabilities of around 300 billion euros, the group is considered the most indebted real estate company in the world.
Trading was suspended for months
In view of the weekend’s arrests, there is renewed concern that Evergrande will further deepen the crisis in the important real estate sector. Trading in Evergrande shares had been suspended for almost a year and a half and only resumed at the end of August.
On Friday, the national financial regulator gave the green light for the takeover of the insolvent insurance subsidiary Evergrande Life Insurance. The buyer is a state-owned company called Haigang Life Insurance, specially created in Shenzhen
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It is currently difficult for investors to assess the development of the turbulent real estate values on the Chinese market. This doesn’t just affect Evergrande. Country Garden shares are also volatile.
At the end of August, the Chinese real estate company’s shares had fallen to an all-time low. However, the price then doubled, only to enter a downward spiral again at the beginning of this week. Country Garden’s debts amount to around 178 billion euros.
Here too, the default has been averted for the time being, but the company is still in crisis. A collapse of Country Garden could spell further trouble for China’s real estate sector. The industry is responsible for a quarter of China’s gross domestic product.
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