Asian Airline Shares Plunge on Gloomy IATA Forecast
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%
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.