Shares in China Evergrande surged nearly 17 per cent after the company’s early repayment of a $2bn bond helped ease investor concerns about leverage at the world’s most indebted property developer.

The jump in the group’s Hong Kong-traded stock on Tuesday came a day after it said it would pay HK$16.5bn (US$2.1bn) to redeem the convertible bond, which it issued in 2018 and was due in 2023.

Evergrande, which as of June owed Rmb835.5bn ($128.8bn), has racked up debt after spending years at the heart of China’s booming residential property market. It has come under intense scrutiny over the past year as Beijing has sought to constrain leverage in the sector. Last March, the company pledged to reduce its borrowings by Rmb150bn per year through 2022.

The Chinese government last summer unveiled new rules, known as “three red lines”, in an attempt to rein in developers’ borrowing after house prices continued to rise during the coronavirus pandemic. At the end of last year, the government announced further rules that limit lending to the sector.

In a statement to Hong Kong’s stock exchange on Monday, Evergrande said the redemption “fully demonstrated the cash strength and sound financial management ability of the company”. It added that it “is confident that it will accomplish its goal of reducing interest-bearing indebtedness by Rmb150bn in 2021”.

The company has also sold assets in recent months to pay down its debts. In November, Evergrande shares jumped after it raised $2.2bn by selling a stake in Guanghui Industrial, an energy and logistics division. Evergrande’s other lines of business include an electric vehicle unit.

The company’s shares fell almost a quarter in 2020 but have rallied 15 per cent this year. Reports in September that Evergrande had sought support for a previously planned reorganisation from the provincial government in Guangdong, where the company is based, prompted fears of a cash crunch. The company denied the reports.

Evergrande would have been on the hook to investors for about Rmb130bn if a stock market listing of a large subsidiary in Shenzhen did not go ahead. However, it secured agreements with the vast majority of the investors and the listing was cancelled in November.

Soo Cheon Lee, chief investment officer at asset manager SC Lowy, said Evergrande was “doing the right thing” and that the credit market had expected the bond to be repaid. But he added that there were still questions over the company’s debt.

“The jury’s still out . . . they have a series of bonds maturing over the next few months,” he said.

Tuesday’s share price increase led a rally across Chinese developers a day after economic data underscored the pace of the country's economic recovery, with real estate investment rising 7 per cent in 2020. Country Garden, another big Chinese property group, rose 4 per cent in Hong Kong trading.

There has been a frenzy of issuance in the wider Asian bond market in the opening weeks of 2021, with companies taking advantage of low rates to raise tens of billions of dollars.