Asian Airline Shares Plunge on Gloomy IATA Forecast

In Asia Wednesday Hong Kong's Hang Seng Index plunged 2% to 22,975 and China's Shanghai Composite fell 0.5% to 2,911. In Japan the Nikkei 225 Index dipped 0.1% to end the session at 10,310.

Gloomy data from the International Air Transportation Association (IATA) warned that climbing fuel costs, combined with sluggish economic growth, could add up to pathetic profit margins for airlines next year. And that's despite revising profit projections upwards for 2011. According to the agency, "Net margins remain weak at 2.7% for 2010 and falling to 1.5% in 2011." European carriers are at the bottom of the barrel, thanks to choking taxes and general economic turmoil. Asia Pacific airlines stand to fare the best, thanks to higher demand from travelers who are still prepared to fork out a premium -- and of course the superior service.

Even so, investors hauled money away from airlines sending Cathay Pacific plummeting 7.2%. An analyst at Daiwa Institute of Research told Bloomberg, "There are some concerns whether airlines such as Cathay can sustain the stellar growth of this year into 2011." Other airlines also slumped in Hong Kong with Air China plunging 5.9%, China Eastern Airlines slumping 4.1% and China Southern Airlines down 3.8%.

Oil producers also sank in Hong Kong with PetroChina sliding 3.6% and Cnooc, an offshore oil producer sliding 2.8%

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Hong Kong property companies declined today as fears that the city really does have a property bubble began to take hold. Companies like JP Morgan, currently snapping up a $900 million property in London's financial district, have begun issuing reports saying, "Economic growth cannot catch up with asset price growth," reports Bloomberg. Today Sino Land nosedived 3.3%, Sun Hung Kai dropped 2.6%, New World Development lost 2.4% and Cheung Kong fell 1.6%. Even Wharf Holdings, the operator of the sprawling Harbour City Mall and Times Square Mall, now buzzing with Christmas shoppers and Chinese acrobatic displays, declined 3.5%.

Property developers in China also lost value today. Poly Real Estate sank 2%, Gemdale tumbled 1.3% and China Vanke dipped 0.7%.

Rizhao Port Co., which handles coal and iron shipments, declined 1.8%, despite announcing it will raise fees. Meanwhile, China Coal Energy advanced 1.8% and China Shenhua Energy gained 1.3%. Coal producers have been ordered to freeze prices, which had been soaring in line with the country's rocketing inflation rate. Meanwhile, China Shaanxi Yanchang Petroleum Chemical Engineering, an oil and natural gas firm, headed up 2.9%.

In Japan, Dentsu, one of the country's largest advertising agencies, racked up a 2.7% gain while Chiyoda shot up 3.7%.

Japanese electronics firms disappointed today with Sony edging up 0.4%, while Konica Minolta plunged 2%, Sharp tumbled 1.6% and Panasonic dipped 0.1%.

Car companies were mixed with Fuji Heavy Industries, maker of the Subaru, advancing 1.3% and Toyota climbing 0.9%, while Mazda lost 1.2% and Isuzu sank 0.3%. Perhaps data from the Christmas shopping season will turn these numbers around next month.