Tue, May 13, 2003 - Page 11 News List

Travel stocks fall as China's markets reopen

SARS IMPACT Back trading after an extended May Day holiday aimed at reducing the spread of the virus, investors found little to cheer about for the tourism industry

BLOOMBERG , SHANGHAI

China Eastern Airlines Corp, China CYTS Tours Holding Co and other companies that may be hurt by global advisories against trips to China led declining shares yesterday as the nation's markets reopened after a 10-day SARS-induced closure.

Investors remain concerned about the spread of the disease in the world's worst-infected nation after Premier Wen Jiabao (溫家寶) said on Sunday that the situation is still "grim," analysts said.

SARS cases in China surged 40 percent since shares last traded.

"Investors are worried that SARS situation may hurt companies' earnings if it drags on," said Song Huaisong an analyst at Industrial Securities Co.

China extended the May Day holiday market closure by four additional trading days to prevent some of the nation's 69 million stock investors from cramming trading halls where stocks are normally bought and sold. The closure was part of efforts by China to limit public gatherings.

At the midday break, the shares traded on the benchmark Shanghai A-share index were down a third from April 30 to 657 million. China's markets, capitalized at about US$500 billion, are Asia's largest after Japan's.

The benchmark Shanghai A-share index, which tracks yuan-denominated shares, closed morning trading up 0.2 percent at 1,595, buoyed largely by Shanghai Automotive Co. on its report of higher sales. The Shenzhen A-share index was down 0.2 percent at 440.

Foreign-currency-denominated B-share indexes also declined.

The Shanghai B-share index dropped 1.7 percent while its counterpart in Shenzhen slid 0.07 percent.

Credit Suisse First Boston predicts China's economic growth rate may halve this quarter as the SARS epidemic curbs consumer spending in areas with major outbreaks. CSFB predicts growth will decelerate to 5 percent, its slowest pace since the aftermath of the 1989 crackdown on pro-democracy activists in Tiananmen Square.

In the first quarter, China's growth rate reached a seven-year high of 9.9 percent.

"People are not taking any chances and aren't in the mood to trade as they are gripped by the fear of SARS as the media talks about nothing but SARS these days," said Chen Zhe, an analyst at Citic Securities Co in Shanghai.

"We have about 50 percent less people in the trading halls than before the SARS outbreak," Chen said.

The value of shares traded in the morning session fell to 5.3 billion yuan (US$639 million) from 8.4 billion on April 30.

Tourism-related companies have been hardest hit as the World Health Organization, the US and other countries continue advisories against travel to China.

China Eastern Airlines Corp, the nation's No. 3 carrier, fell 3.1 percent to 4.45 yuan.The airline said it may post a second-quarter loss because SARS has slashed business.

Hainan Airlines Co postponed its shareholders' meeting because of the spread of SARS. The carrier's Class B shares fell 2.3 percent to US$0.64.

CYTS Tours, the country's No. 2 tour operator, fell 3.6 percent at 8 yuan. Shanghai Auto shares rose 7.2 percent to 12.8 yuan, after reporting a third rise in sales last month from a year earlier.

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