The shares of the Chinese real estate developer Evergrande rose by as much as 82% on Wednesday, leading gains in the Hang Seng Index.
Since then, the shares have reduced some of their gains but were still up by about 70%.
The real estate sector was the biggest gainer in the HSI, but the overall index remained in negative territory, dragged down by healthcare and industry sector stocks.
Other companies, such as Country Garden Holdings and Logan Group, also surged, gaining up to 26% and 28%, respectively, while the Hang Seng Mainland Property Index rose by about 4%.
These gains came after reports that Country Garden had managed to make a $22.5 million payment on bond coupons on Tuesday, averting default. The bond payments were originally due in August, but Country Garden made them just hours before the 30-day grace period expired.
The Chinese real estate sector has been struggling since Evergrande defaulted in 2021. Last week, the shares resumed trading and closed nearly 80% lower in their first session in 17 months. Evergrande shares closed at 35 Hong Kong cents on Tuesday.
Other real estate stocks also tumbled last year amid fears of contagion. Country Garden shares have fallen 53% so far this year, while Logan dropped 18%.
On Wednesday, the Chinese state-owned Securities Times published a commentary calling for the lifting of “policies that restrict property purchases in cities other than the hottest ones” as soon as possible, according to a CNBC translation.
The commentary argued that “given the current situation of significant changes in the supply-demand relationship in the real estate market, it is no longer appropriate to maintain restrictive policies that were previously implemented to curb speculation.”
It, therefore, concluded that there is an “urgent need” to increase policy support to boost sales, thus unleashing pent-up demand due to these stringent housing policies.