CHINA Eastern Airlines Corp, set to sell a stake to Singapore Airlines Ltd, yesterday plunged the most in six years on Hong Kong's stock market as investors abandoned hope of Air China Ltd making a counter-offer.
The airline, China's third-largest, slumped 17 percent to HK$6.37 (82 US cents), the biggest fall since the terror attacks on September 11, 2001. The carrier has ratified the sale of a stake to Singapore Airlines and parent Temasek Holdings Pte, it said on Friday. The two will buy new shares at a 40-percent discount to yesterday's closing price.
China Eastern's Hong Kong-listed stock doubled in two months after the Shanghai-based carrier agreed to the Singapore deal on September 2, partly because of speculation that Air China's parent and Cathay Pacific Airways Ltd would try to trump it. The two considered and rejected plans to make a counter-bid, Air China said on September 24.
"The market had expected Cathay and Air China to offer a better price to fight against Singapore Airlines," Jack Xu, a Shanghai-based analyst at SinoPac Securities Asia Ltd, told Bloomberg News. "The ratified deal cuts the possibility of a counter-bid."
China Eastern shares have dropped 27 percent in Hong Kong since Air China's September 24 statement. Air China, the nation's largest international carrier, and Cathay Pacific didn't say why they dropped the plan.
In Shanghai, China Eastern fell seven percent to 12.96 yuan (US$1.75) at the close of trading. Singapore Airlines dropped 2.1 percent to S$18.90 (US$13.05) in the city-state. Singapore Airlines also yesterday started selling electronic tickets jointly with China Eastern, according to a statement from the carrier.
"This is one sign of the partnerships being built between both airlines," Huang Cheng Eng, Singapore Airlines' executive vice president of marketing & the regions, said in the issued statement.