Shares of Chinese property developer Evergrande as much as 82% on Wednesday, leading gains on the Hang Seng Index.
The stock has since pared its gains, but was still about 65% higher.
The real estate sector was the top gainer on the HSI, but the overall index was still in negative territory, dragged by health-care and industrial stocks.
Other stocks like Country Garden Holdings and Logan Group also surged, gaining as much as 26% and 28% respectively, while the Hang Seng Mainland Property Index was up about 4%.
The gains come after Country Garden reportedly managed to pay $22.5 million in bond coupon payments on Tuesday, narrowing avoiding default.
The bond payments were originally due in August, but Country Garden submitted the payments hours before a 30-day grace period expired.
China’s property sector has languished ever since Evergrande defaulted in 2021. Last week, the stock resumed trading and closed nearly 80% lower in its first session in 17 months. Evergrande shares had closed at 35 Hong Kong cents on Tuesday.
Other property stocks have also plunged in the past year amid contagion fears. Shares of Country Garden have fallen 53% so far this year while Logan dropped 18%.
On Wednesday, China’s state-owned Securities Times published a commentary calling for the lifting of “policies restricting property purchases in cities other than the hottest top tier cities” as soon as possible, according to a CNBC translation.
The commentary argued that “in the current situation where there are major changes in the demand-supply relationship in the property market, it is no longer appropriate to retain restrictive policies that were previously implemented to curb speculation.”
It concluded, therefore, there was an “urgent need” to increase policy support to boost sales, thereby releasing demand suppressed by these rigid housing policy.
— CNBC’s Clement Tan contributed to this report.