Shares of China's Longfor Rebound as Developer Denies Default

Shares of Longfor Group Holdings jumped as much as 11% in early trading in Hong Kong on Thursday after the Chinese developer denied rumours it had defaulted on debt payments. It ended up 5.7% at the close of trading.

Longfor shares plunged 16% on Wednesday in its worst day on record, to its lowest level in nearly four years.

Late on Wednesday Beijing-based Longfor said that its commercial dues had been settled without any deferred payment, and that the company “is operating normally and has sufficient available cash reserves.”

The Chinese real estate market is in the midst of a major debt crisis as large property developers such as China Evergrande and others have defaulted on debt payments since late last year.

The Chinese government has in recent months stepped up measures to help stabilise the sector, which accounts for roughly a quarter of the economy.

“The Longfor drama indicates that investors remain circumspect toward Chinese developers,” said Yan Yuejin, director of E-house China Research. “Market confidence remains fragile.”

Three sources said that in a meeting with investors on Wednesday evening, Longfor executives said its outstanding 700 million yuan ($104 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 it might repay early in the second half the syndication loans maturing next year, adding that its current cash to short-term debt ratio was at 10%.

The Shanghai Commercial Paper Exchange also said the property developer had no record of commercial bill defaults, while adding that it condemned rumours attempting to disrupt market order.

Daiwa said in a report it continues to see Longfor as one of the most defensive private developers with a stable finiancial position and sizeable recurring income.