Cathay Pacific Airways and Air China led a slump in airline stocks yesterday after an attempt to block Singapore Airlines from buying a stake in China Eastern Airlines Corp was aborted following political opposition from Beijing.
A joint bid by Cathay and Air China's parent company to buy a holding in Shanghai-based China Eastern was abandoned late on Monday after failing to receive approval from the State Council.
The attempt raises doubts about the Hong Kong flag carrier's growth strategy in the mainland, particularly its attempt to boost its share in the lucrative Shanghai market.
Investors who last week bid up airline share prices in anticipation of a dogfight for China Eastern scrambled to unload the stocks yesterday. Shares in China Eastern plummeted 14.71 per cent to HK$7.42, Air China dropped 11.66 per cent to HK$10.46 and Cathay shed 4.63 per cent to settle at HK$21.65.
The attempt to foil SIA's bid for a 24 per cent stake in the Shanghai-based carrier was effectively blocked at the weekend by the State-owned Assets Supervision and Administration Commission (Sasac), Caijing magazine reported.
Sasac had already given its approval to the HK$7.2 billion Singaporean bid for a stake in China Eastern, which in addition to the city state's flag carrier included state-owned Temasek Holdings.
Beijing's intervention in a Hong Kong stock exchange transaction may raise uncertainties for investors hoping to cash in on an anticipated wave of consolidation among major mainland airlines, which despite their overseas stock listings remain closely held by state-owned companies.