Longfor shares rose as much as 11% in Hong Kong on Thursday morning. On Wednesday, the stock slumped 16% in its worst day on record, and hit the lowest in nearly four years on the default rumour.
Beijing-based Longfor said late on Wednesday that its commercial paper due 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 debt crisis as major property developers including China Evergrande Group have defaulted on debt payments in recent months.
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 told Reuters that in a meeting with investors on Wednesday evening, Longfor executives said its 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 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. It added 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.
($1 = 6.7412 Chinese yuan)
(Reporting by Harshita Swaminathan in Bengaluru, Samuel Shen in Shanghai, Kevin Huang and Shuyan Wang in Beijing; Editing by Devika Syamnath and Jacqueline Wong)
