(Bloomberg) -- Chinese developer stocks rallied for a second day after two major cities scrapped restrictions on residential property purchases, boosting optimism that more local governments will follow suit. 

A Bloomberg gauge of China developer shares climbed as much as 9.8% and reached the highest level since January. Shimao Group Holdings Ltd. led gains, rising as much as 73% in Hong Kong, while China South City Holdings Ltd. and China Aoyuan Group Ltd. also jumped more than 20%.

China’s efforts to revive property demand gathered steam this week when Hangzhou and Xi’an said they will remove eight-year-old curbs on residential property purchases and no longer review the qualifications of homebuyers. All tier-2 cities are also on the verge of scrapping housing restrictions, according to Bloomberg Intelligence. 

“We are incrementally positive on the government policy actions — that’s a big step towards the right direction,” said Alec Jin, investment director of Asian equities at abrdn.

Sentiment among homebuyers in China has been crushed by falling prices and concern cash-strapped developers will fail to complete building projects.

The latest initiatives “should help improve market sentiment,” said Raymond Cheng, head of China property research at CGS International Securities HK. The broker prefers state-owned developers such as China Overseas Land & Investment Ltd. as well as quality private firms including Longfor Group Holdings Ltd. or China Vanke Co., he said.

--With assistance from Jing Jin.

©2024 Bloomberg L.P.