Cathay report weighs heavily on stock values
SHARES in Cathay Pacific Airways and majority owner Swire Pacific fell for the third straight day yesterday, with analysts blaming continued investor uncertainty over the airline's future as the territory's de facto flag carrier.
Both featured on the top 10 list of worst performers by percentage change on the Hang Seng Index, with Swire's 3.81 per cent drop leading the pack.
Swire closed the day $2 down, at $50.50, while shares in Cathay Pacific closed at $10.60, a 3.2 per cent drop.
Analysts said a report in the South China Morning Post yesterday, which described an internal memo to staff from chairman Peter Sutch saying the implications of a Chinese company's application to operate flights from the territory go 'well beyond our own interests and those in the aviation community of Hong Kong', had pushed the stock down.
The latest edition of Cathay's in-house newspaper The Weekly, to be published today, will expand on the remarks, a Swire spokesman said.
Cathay stock fell 5.96 per cent in morning trading and was down 70 in the afternoon - a 6.4 per cent plunge - before finishing the day down 35.
The Civil Aviation Department on Monday revealed that the China National Aviation Corporation (CNAC), which is controlled by the mainland's aviation regulator, had applied for an air operators' certificate and it intended to start an airline to compete directly with Cathay.
Some said it was a political move by Beijing aimed at warning Cathay it would not be able in future to enjoy the virtual monopoly it now holds.
Analysts said the airline was facing a battery of problems.
It is already embroiled in a dispute with Qantas over the Australian airline's alleged abuses of the existing air service agreement on the amount of passengers it can pick up from the territory and carry onward to Singapore and Bangkok, and has also been hurt by a rise in oil prices over the past several months, analysts said.
'They've got all kinds of problems. They've got the CNAC application, the Qantas problem, oil prices are higher - this is all weighing the stock down,' said Morgan Grenfell aviation analyst Viktor Shvets.
'The sentiment will probably continue to be bearish.' Lehman Brothers analyst Eisha Cheng said she expected Cathay stock would level out once the initial shock of the CNAC revelation wore off.
'I think they will have good support where it [the stock price] is now,' Ms Cheng said.
'This is a short-term price movement that we've got here.' Cathay last month reported a disappointing 4.1 per cent rise in attributable earnings for 1994, to $2.38 billion.
Fallout from the devastating earthquake in Kobe, Japan, early this year is expected to have an impact on first-half 1995 earnings.