How Are Avian Flu Concerns Affecting Chinese Airline Stocks? (CEA, ZNH)

Despite concerns about avian flu the stock prices of Chinese airlines remained relatively steady last week. Chinese airlines traded on US stock exchanges include China Southern Airlines (ticker: ZNH) and China Eastern Airlines (ticker: CEA). With the potential for avian flu wreaking havoc on Asia's hotel and airline industry this is somewhat surprising. The following is a short extract from an article in Barron's (subscription required):

"Probably, I'm too complacent, but this is not as severe as people are thinking," says Lan Xue, head of Asia Pacific research for Citigroup in Hong Kong. In fact, Xue believes airline stocks -- major market laggards as fuel prices soared -- are poised to snap back. This isn't a view held by Citi's Asia airline analyst, she notes.

It's certainly true that airlines are underowned by institutions and that earnings will spring higher as jet-fuel prices plateau. Merrill Lynch analyst Paul Dewberry issued Buy ratings recently on Air Asia, Cathay Pacific, China Airlines and EVA Airways. Strong passenger demand has let airlines boost fuel surcharges, Dewberry writes, but at a pace slower than that at which fuel prices have risen. However, the surcharges should catch up next year. If the cargo market turns higher, he argues, Asian airline earnings could rise 16% next year, after falling 30% this year.

Related

• Analyst Discusses China Stock Picks (ZNH).
• All articles on China Southern Airlines.
• All articles on China Eastern Airlines.

ZNH chart.

CEA chart.

Comments

[timezero]

First of all, I am an illiterate on medical stuff. I did some research on this bird flu thing. As its name suggested, the genesis of the disease is a sort of virus carried by birds. Migratory birds have carried the virus for thousands of years. In the history, the virus had been transferred to poultry. The scientists have divided the virus into two categories. One of them is causing mild symtoms while the other is lethal even to the orginal host, migratory birds. In some rare occasions, the virus can be transferred to human and pigs and cause death. But, the historical statistics shows that possibility is very low although there were small-scale outbreaks. In one word, most people are immune to it like to many virus carried by animals.

The curent concern about it is whether and when this virus will mutate to a form that can be easily transferrable among people. My question is why this smart bird flu choose to mutate to massively infect human now? Why in thousands of years during which they have only caused minor trouble to human then suddenly WHO expects it will kill millions of us? Does someone push this process of mutation? I do feel that way. Imagine there are tons of virus that normally infect animal and we can believe they are all on the way of mutation to kill people.

When people are panic about the mutaion of bird flu virus, they should also do some research on why, in the God's name, will this virus mutate now after waiting for thousand of years and who is the next on the queue to mutate and scare the hell out of us?

If the virus does mutate to kill people now, I suspect the mutation must be aided by someone who has an interest to see an outbreak during his lifespan.

[chinavestor]

This is what I think is HOT related to avian flu: SINOVAC!! SVA is the ticker symbol, traded in AMEX. they are an R&D and production facility of vaccines!!!!

This stock is really hot right now!!!

There is a great article - an actual report with Mr. Weidong Yin, SVA's CEO- at www.chinavestor.com , October Newsletter. you can get it for free, all it takes is to sign up for a one month free trail and you are all set.

Good luck,

investor investing in China

[WHarmill]

I believe that CEA is about to go NORTH!

1. Gross revenues: RMB8.288 billion, up 42.03% compared with the same period of 2004.
2. Net profit amounted to RMB673 million, up 122.84% compared with the same period of 2004.
3. Basic EPS is RMB0.13, up by 218.18% compared with the same period of 2004.

Looking forward: The Company is expected to keep high passenger load factor in the coming quarters. So this is my reason for BULLISH CEA.