Hong Kong-listed airline stocks rebounded yesterday on investors' hopes that the spread of Sars was subsiding in Hong Kong and China, and that the World Health Organisation would drop its advisory cautioning against travel to the territory. 'Investors are eyeing a recovery of the airline business, speculating the World Health Organisation would remove Hong Kong from its [advisory ban] list,' said Louis Wong Wai-kit, research director of Phillip Securities. China National Aviation Company (CNAC), which owns 43.29 per cent of Dragonair, soared 9.41 per cent to 93 HK cents. The counter has skidded 27.34 per cent since March 14, when the Hong Kong government started posting daily tolls of new Sars cases. CNAC issued a profit warning about three weeks ago, saying its first-half results would be significantly affected by declining passenger demand. China Eastern Airlines and China Southern Airlines were also up yesterday on hopes that the number of new cases in China was peaking. China Eastern rose 8.86 per cent to 86 cents and China Southern Air was up 4.7 per cent to $1.78 yesterday. Cathay Pacific Airways, which has lost 13.65 per cent since March 14, was a relative laggard, gaining only 1.55 per cent to close at $9.80 yesterday after saying it would cut its final dividend for last year by half to 28 cents a share. The dividend cut was made in response to plunging passenger traffic caused by the Iraq war and fears over the Sars epidemic. Analysts, however, took the size of the cut as a pleasant surprise. 'The decision, at least, removes the uncertainty overhang on Cathay,' said Kenny Tang Sing-hing, associate director at Tung Tai Securities. 'Investors had expected Cathay would declare no dividend at all.'