Proactive Investors - China Evergrande shares leapt over 40% as trading began today after the world's most indebted property developer's shares returned from suspension.
Last week, the company said its founder, Hui Ka Yan, was being held by police, though the charges were not specified.
The shares were suspended on Thursday after Evergrande said Hui had been placed under police surveillance, with the company at the centre of a crisis in China's property sector.
With fellow real estate development firm Country Garden Holdings also failing to make coupon payments in August, fears of potential contagion to other areas of the Chinese economy and global investment markets have been triggered.
"There is currently no other inside information in relation to the company that needs to be disclosed," Evergrande said in a statement yesterday.
The stock rocketed over 40% higher to US$0.46 in initial trading before easing back to US$0.39 in the first hour. By the end of the Hong Kong session the closing price was US$0.41, a 28% rise on the day and up from the last time the shares returned from suspension.
In late August, the shares returned from a 17-month suspension and immediately lost US$2.2 billion, or 79% of its market value.
China’s biggest property developer defaulted on its offshore debts in late 2021, when government officials tightened scrutiny on the real estate sector.
It is in the process of getting approvals from creditors and the courts to implement the debt restructuring plan.
But last week its main unit in China was unable to issue new debt due to an ongoing investigation, with a major offshore creditor planning to join a liquidation court petition if a new debt plan is not submitted this month, with a hearing on a winding up petition scheduled for 30 October.
Analysts say the debt restructuring plan now looks set to falter and that the risks of the company being liquidated are increasing, Reuters reported.
Investors worldwide are concerned about the risk of China's property problems fanning out to the wider financial market.
But exposure to Evergrande among European-domiciled investment funds has been much reduced since around US$20 billion was estimated to have been invested before the first default in 2021.
Funds run by emerging markets specialist Ashmore Group (LON:ASHM) is among the most exposed, according to Morningstar data analysed by Citywire, with Aviva (LON:AV) Investors, Goldman Sachs (NYSE:GS) and BNP Paribas (EPA:BNPP) also running funds with some exposure.
At the time of the first default, BlackRock Inc (NYSE:BLK), Royal Bank of Canada's BlueBay Asset Management and UBS Group funds were exposed, while some funds from HSBC (LON:HSBA) have closed position.