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Airlines surge on oil price slide, China’s ambitious airport plan

Gains in most airline stocks offset losses in the energy sector, lifting Hong Kong and Shanghai markets higher on Friday

PUBLISHED : Friday, 26 May, 2017, 9:21am
UPDATED : Friday, 26 May, 2017, 5:45pm

Airline stocks surgedin Hong Kong and mainland Chinese trading on Friday amid optimism that a plunge in oil prices will reduce fuel costs and on news that China plans to build three “world-class airports”.

In Hong Kong, Air China briefly soared 9.5 per cent to HK$7.84, before trimming its gains to 3.5 per cent to close at HK$7.41. China Southern Airlines jumped 3.4 per cent to HK$5.78, while China Eastern Airlines advanced 1.1 per cent to HK$4.47.

In Shanghai, Air China surged 5.4 per cent to 9.99 yuan. China Southern Airlines and China Eastern Airlines rose 2.2 per cent and 1.1 per cent respectively to 8.50 yuan and 6.73 yuan.

Hong Kong’s flagship carrier Cathay Pacific, however, pulled back after recent gains and was down 1.8 per cent to HK$11.71 at the close, dropping for a second day.

The gains in most airline stocks offset losses in the energy sector, lifting Hong Kong and Shanghai markets higher on Friday but overall trading was quiet ahead of a four-day holiday in China. Hong Kong’s market will also be closed for a public holiday on Tuesday.

The market is quiet ahead of next week’s holiday in China and Hong Kong so the Hang Seng Index is trading in very narrow ranges
Castor Pang Wai-sun, Core Pacific-Yamaichi

The Hang Seng Index closed up 8.49 points to 25,639.27 and the Hang Seng China Enterprises Index, known as the H-shares index, edged up 0.1 per cent to 10,579.67. Mainland China’s Shanghai Composite Index inched up 0.1 per to 3,110.06.

“The market is quiet ahead of next week’s holiday in China and Hong Kong so the Hang Seng Index is trading in very narrow ranges,” said Castor Pang Wai-sun, Core Pacific-Yamaichi head of research.

The airline sector received a boost after crude futures tumbled nearly 5 per cent overnight, as the Organisation of the Petroleum Exporting Countries (Opec) decided to extend the current deal to cut production by nine months, disappointing some investors who had expected deeper cuts.

July WTI crude dropped 4.8 per cent to settle at US$48.9 a barrel on the New York Mercantile Exchange, and July Brent crude was down 4.6 per cent to settle at US$51.46 a barrel on the ICE Futures exchange in London.

Separately, remarks from China’s civil aviation chief on plans to build more airports also sparked fund inflows into airlines and airport operators.

Feng Zhenglin, head of the Civil Aviation Administration of China, said the nation will build three clusters of “world-class airports” in the Beijing-Tianjin-Hebei region, Yangtze River Delta and the Pearl River Delta, according to state-owned Xinhua News Agency.

He said the plan will boost construction of an air “silk road” connecting China with the world.

Hong Kong-listed Beijing Capital International Airport advanced 1.8 per cent to HK$11.3 while Shanghai-listed Shanghai International Airport rose 0.7 per cent to 37.8 yuan.

PetroChina and Cnooc both dropped 0.9 per cent to HK$5.29 and HK$9.08 respectively.

On the mainland, the large-cap CSI300 dipped 0.2 per cent to 3,480.44. The Shenzhen Composite Index eased 0.1 per cent at 1,810.11, while the ChiNext index retreated 1.0 per cent to 1,759.63.

Overnight, US stocks advanced for a sixth straight day, lifted by strong earnings from retailers including Best Buy. The S&P 500 index and the Nasdaq Composite Index both set record highs, up 0.3 per cent and 0.7 per cent respectively to finish at 2,415.07 and 6,205.26. The Dow Jones Industrial Average also settled 0.3 per cent higher at 21,082.95.

Shares in Best Buy surged 22 per cent to US$61.25.

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