(Bloomberg) -- Shares of Chinese developers jumped on optimism that Beijing will provide policy support for the purchase of unsold homes from distressed builders. Their high-yield bonds also advanced. 

A Bloomberg gauge of Chinese real estate stocks rose as much as 13%, leading a broader rally in Hong Kong as the market reopened after a holiday on Wednesday. Longfor Group Holdings Ltd.’s shares climbed as much as 15%. Cash-strapped China Vanke Co. surged 16%, with some of its dollar bonds poised for their biggest daily gains since November. 

China is considering a proposal to have local governments buy millions of unsold homes, people familiar with the matter said on Wednesday, in what would be one of its most ambitious attempts to rescue the property market. A years long slump in home sales and prices has weighed on the economy and buyers are worried about the ability of cash-crunched developers to deliver.

“The move, if implemented, is an important step to rescue the sector as it could address excess inventory and developers’ liquidity issues,” Raymond Cheng, head of China property research at CGS International Securities HK, wrote in a note. Cheng said 1.8 trillion yuan ($250 billion) of funding is needed, assuming five million units are bought from developers.

Officials are still debating details of the plan and its feasibility, the people said, adding that it may take months to be finalized if policymakers decide to go ahead. 

Beijing has been rolling out more measures to support the sector in recent months, with Goldman Sachs Group Inc. saying that the housing slump has yet to reach a bottom. Some major cities such as Hangzhou and Xi’an have scrapped restrictions on purchases recently. 

Optimism over more policy support has helped drive the Bloomberg property gauge up about 60% from an April 19 low. The average price of Chinese high-yield dollar bonds, most of which were issued by developers, has gained 2.1 cents so far this week and is set for the biggest weekly advance in seven months. 

Top gainers this month included some of the survivors of the crisis, including China Vanke, Longfor Group and Seazen Group Ltd. Vanke’s note due in 2027 jumped 6.3 cents on the dollar Thursday morning, while another one maturing in 2029 is up 6.7 cents.

“Beijing has realized how challenging it is to clear housing inventory and thus we see measures rolling out now,” said Ziqi Jiang, chief investment officer of Regent Capital Management. “The government wants to support the sector but not overstimulate it,” Jiang added.

Investors have pointed out that a large quantity of unsold homes due to lackluster demand is a key issue. The value of new-home sales from the 100 biggest real estate companies slid about 45% in April from a year earlier to 312.2 billion yuan, following a 46% decline in March, according to preliminary data from China Real Estate Information Corp.

“The possibility to “expand the scale’ could potentially be exciting,” JPMorgan Chase & Co. analyst Karl Chan wrote in a note. “We are still skeptical about whether the scale is large enough to trigger a recovery, but directionally this looks like the right move.” 

“It is possible that the strength may last until the Third Plenary Session in July as hopes for stronger policy support may continue to build up till then,” Chan said, referring to a key policy meeting. 

Other developers also saw their shares gain. Defaulted developer Sino-Ocean Group Holding Ltd. soared as much as 56%, while CIFI Holdings Group Co. rose 29%. 

But even with the recent rebound, a large portion of the debt market remains deeply distressed, while the Bloomberg stock gauge is down almost 80% from a 2018 peak. 

Dollar notes of defaulted builders such as Country Garden Holdings and China Evergrande Group are still trading below 10 cents on the dollar. Vanke’s stock in Hong Kong is also still 87% down from its high. 

--With assistance from Dorothy Ma.

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