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Shares of China’s Longfor Rebound as Developer Denies Default

Shares of Longfor bounced back by 11% in early trading in Hong Kong on Thursday on news it had settled its commercial dues without deferring payment


Shares of Chinese developer Longfor jumped on Thursday after it denied defaulting on a debt.
Shares of China's Longfor rebounded on Thursday after the company settled a debt and made a strong statement on its financial position. Photo: CG Rawlins, Reuters.

 

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.

 

  • Reuters with additional editing by Jim Pollard

NOTE: This report was updated with details of the share price at the close of trading on August 11. 2022.

 

ALSO SEE:

 

China Property Slump May Worsen Amid Covid Curbs: Analysts

 

China Property Crisis: More Pain Ahead In The New Year – SCMP

 

Third of China’s Top Developers Could Default in 2022: Goldman

 

Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years and has a family in Bangkok.

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