Money

Air China falls in Shanghai on concerns price jump overdone

(Agencies)
Updated: 2010-05-06 17:11

Air China Ltd, the nation's largest international carrier, fell in Shanghai trading as investors locked in gains following an announcement about a business-tax exemption for overseas flights.

The carrier dropped 3.7 percent to 12.90 yuan, following a 7.1 percent jump yesterday. In Hong Kong, the airline tumbled as much as 8.7 percent, the biggest intraday decline since August, and was down 7.3 percent at HK$7.90 as of 3:29 pm.

"Yesterday's surge was overdone," said Zhang Qi, an analyst at Orient Securities Co in Shanghai. "The current share prices already factor in the positive impact from the tax exemption."

Air China said late yesterday it may save 549 million yuan ($80 million) after the government announced the tax exemption, which also applies to international shipping services. Across Asia, stocks fell for the fourth day in a row, the longest losing streak since January, on concern Europe's debt crisis will slow the global recovery.

Huang Bin, board secretary for Air China, declined to comment on the share price fall. He said the Beijing-based company isn't planning any announcements today.

China Eastern, the nation's No 2 carrier, dropped 5 percent in Shanghai after gaining 4.8 percent yesterday. The MSCI Asia Pacific Index fell 2.6 percent. The Shanghai Composite Index slid 4.1 percent.

Cosco Shipping

Cosco Shipping Co, a unit of China Ocean Shipping (Group) Co, said it expects a 42 million yuan saving from the tax exemption, which dates back to Jan 1. The company fell as much as 5.4 percent in Shanghai. Affiliate China Cosco Holdings Co, Asia's largest shipping line by market value, dropped 4 percent.

The tax exemption will have a limited impact on China Cosco's earnings, the Tianjin, China-based company said in an e- mailed reply to Bloomberg questions.

The waiver follows losses for shipping lines last year caused by global overcapacity and slowing trade. The government has also bailed out State-controlled airlines to help them pare debts.

"Beijing's move is designed to strengthen the competitive edge of domestic airlines," said Zheng Qingping, an analyst at Tebon Securities Co. "It will also help stimulate imports and exports, alleviating possible downward pressure on the economy in the second half of the year."

Air China will be the biggest beneficiary of the tax break among carriers as it gets about 50 percent of sales from overseas flights, said Yao Jun, an analyst at China Merchants Securities Co. China Eastern Airlines Corp gets about 26 percent from international services and China Southern Airlines Co about 15 percent, he said.

Calls to China Eastern's Board Secretary Luo Zhuping and China Southern's Board Secretary Xie Bing went unanswered.