Shares of China Southern Airlines and China Eastern Airlines Corp are expected to rally when they resume trading today after their suspension, as investors welcome news of cash injections and as the airlines catch up on the broader market's gains.
The parent companies of the two airlines have agreed to inject 3billion yuan (HK$3.39 billion) each into China Eastern and China Southern through A and H-share issues to lighten their debt burdens, according to documents yesterday.
China Southern said the capital injection would not take place before February next year since the deal still required shareholder approval. It did not provide details of the share placement.
China Eastern will issue 652.18 million yuan in H shares at 1 yuan each and 2.35billion yuan worth of A shares at 3.60yuan each to parent China Eastern Air Holding. The issue price of the A shares will be at an 8.4 per cent discount to its last traded price. The H shares will be issued at a 50.9 per cent premium.
The two stocks have been suspended from trading since November 27. Air China shares have gained 52.94 per cent since that time.
Falling passenger volume, overcapacity, massive hedging losses on fuel prices and slowing yuan appreciation cut China Eastern and China Southern's market capitalisation to below HK$10 billion.
