Airlines Drag On Hong Kong Shares

Monday, June 8, 2009

HONG KONG -- Hong Kong shares started the week downbeat, as airline stocks retreated on an industry-wide forecast of losses that are double those previously expected. Investors awaited further details of Bain Capital's purchase of a stake in Chinese electronics retailer Gome, as well as a tie-up between Ping An Insurance and Shenzhen Development Bank. Japanese exporter stocks had a brighter Monday, as signs of stabilization in the U.S. job market encouraged a stronger dollar, beating back the yen.

Hong Kong's Hang Seng Index closed down 2.3%, to 18,253,39 points. Airlines stocks took a beating, after the International Air Transport Association estimated the global airline industry will post a loss of about $9 billion, double previous forecasts. China Southern Airlines plunged 4.0% to 2.16 Hong Kong dollars (28 cents).

The H-shares of China Eastern Airlines were put on a trading halt as the air carrier is said to be in merger talks with smaller Shanghai Airlines. The merger has reportedly received formal government approval.

Trading of Ping An Insurance and Shenzhen Development Bank shares were halted, pending an announcement of Ping An's possible purchase of U.S. private equity firm TPG's controlling stake in the Shenzhen bank.

Media reports floated widely Monday that Bain Capital will take a 16% to 18% stake in China's Gome Electrical Appliances Holdings. Gome shares have been suspended from trading since late last year when Gome founder Huang Guangyu was detained by authorities for alleged improper financial conduct. Huang, still in police custody, was once China's richest person.Banking stocks in Hong Kong mostly retreated after last week's rally. Bank of China declined 1.1% to 3.52 Hong Kong dollars (45 cents), while HSBC lost 2.6% to 64.10 Hong Kong dollars ($8.27).

The Shanghai Composite index rose 0.5% to 2,768.34. China Minsheng Banking jumped 5.8% to 7.69 yuan ($1.12), after the lender said over the weekend that it plans to sell up to 3.3 billion new shares in the Hong Kong market, representing about 15% of its enlarged share capital.

Courtesy: Forbes.com