Group shares resumed trading in Hong Kong today after a Hainan government demolition order.

It is getting almost impossible for investors to figure out what is going on with Evergrande.

The group suspended its shares on the Hong Kong Exchange yesterday, leaving investors groping in the dark with an anodyne «inside information» rationale often peddled by companies listed on the exchange. Then today, before resuming trading, it gives us the full story.

A Little Less Ocean Flower

Apparently, the Danzhou city law enforcement bureau has levied a penalty on the group saying it will have to demolish 39 buildings in its Ocean Flower project on Hainan, a tropical island in the South China Sea between Hong Kong and Vietnam often dubbed the Hawaii of China.

So far so good. Except it should be kept in mind that this is a company that has kept international investors and holders of its debt in thrall for much of last year.

Apparently, it is under a strict time limit to complete the job although the administrative penalty happily does not involve any other of the project’s plots of land (but not buildings). Moreover, it says it will «actively communicate» with the authority to «resolve the issue properly».

A Little More Credit

As a complete non sequitur, the message ends with an update announcing its 2021 property sales, mentioning both the revenue figure (RMB 443.02 billion) and the volume (54.265 million square meters).

It then decides it might be an idea to touch on the question of liquidity, telling us it will also «continue to actively maintain communication with creditors» and «strive to resolve risks» while safeguarding «the legitimate rights and interests of all parties».

There does seem to be a great deal of active communication going on here, except with the Exchange.

Breaking it Down

But for international investors, particularly those who have held their shares for more than a year, what risks are there to resolve?

You can’t magically make the share price recover to ten times its current level, a level it was trading at a year ago.

And what rights are being safeguarded if you are a bondholder who hasn’t been paid?

Authorities Come First

By contrast, a penalty from law enforcement seems to have awakened the necessary sense of alacrity in their endeavors.

I am guessing that most holders of the bonds are ruefully wishing for a similar sense of of urgency from them.

In any case, in early afternoon trading, Evergrande shares were up almost 2 percent.