Longfor Group Holdings shares surged in early trading after the Chinese developer denied that it had missed payment on commercial paper.
Longfor shares rose by 11 per cent in Hong Kong on Thursday morning. On Wednesday, the stock fell 16 per cent in its worst day on record, hitting the lowest in nearly four years on the default rumour.
Longfor said late on Wednesday that it had settled its commercial paper without any deferred payment, and that the company is operating normally and has sufficient cash reserves. Chinese real estate market is in the midst of a debt crisis as major developers including China Evergrande Group have defaulted on debt payments in the past few months.
In recent months the Chinese government has stepped up measures to help stabilize the sector, which accounts for about a quarter of the economy.
Yan Yuejin, director of E-house China Research, said that the Longfor drama indicates that investors are circumspect toward Chinese developers. Market confidence is fragile. Three sources told Reuters that Longfor's outstanding 700 million yuan $103.84 million of commercial paper would be fully repaid by the end of the year.
The company said it had no other debt repayment deadlines this year, and that it might repay early in the second half of the syndication loans maturing next year, and that its current cash to short-term debt ratio was at 10 per cent.
The property developer has no record of commercial bill defaults, according to the Shanghai Commercial Paper Exchange. It condemned rumours that tried to disrupt market order.
Daiwa said in a report it sees Longfor as one of the most defensive private developers with a stable finiancial position and large recurring income.