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Stocks dive from record as airlines slump
2007-09-25 03:10:41 Shanghai Daily

DOMESTIC stocks plunged from record today amid slumps among air carriers over speculation about a takeover battle for China Eastern.

The Shanghai Composite Index, which tracks both yuan-denominated A shares and hard-currency B shares, lost 1.08 percent, or 59.13 points, to close at 5,425.88.

The Shenzhen Composite Index, which covers the smaller mainland stock market, declined 0.91 percent, or 13.71 points, to 1,492.53.

Among the stocks in the Shanghai Composite index, 306 rose, 466 fell and 70 were unchanged.

Airline stocks dived today on concerns about a bidding war for China Eastern after Cathay Pacific Airways Ltd and Air China Ltd said they are considering bowing out of a battle with Singapore Airlines to take over a big share of China's third-biggest carrier.

China Eastern, the nation's third-largest carrier by fleet size, plummeted 2.19 yuan (29 US cents), or 9.98 percent, to 19.75 yuan.

Shares of the China Eastern also fell the most in six years in Hong Kong trading as Cathay Pacific said it may announce this week that it's making an offer for a large stake in China Eastern, perhaps in tandem with Air China.

Air China, the nation's largest international carrier, and Cathay Pacific own about 17.5 percent of each other.

Cathay Pacific and Air China may bid for China Eastern as the carrier has nearly 50 percent of the air travel market in Shanghai, according to Citigroup Inc. Singapore Airlines and parent Temasek Holdings Pte agreed to buy a 24 percent stake in China Eastern for US$918 million on September 2.

Cathay Pacific is preparing to make a statement, spokeswoman Carolyn Leung said yesterday without elaboration. Shares of both Cathay Pacific and Air China plunged on the Hong Kong market this morning.

Air China's shares in Shanghai fell 2.77 yuan, or the daily cap of 10 percent, to 24.92 yuan.

China Southern Airlines Co, the nation's biggest carrier, slid 2.57 yuan, or 10 percent, to 23.09 yuan. The stock climbed 79 percent in the three weeks to September 20.

The banking sector also had a bad day but China Construction Bank Corp surged on its debut in Shanghai.

Industrial & Commercial Bank of China, the nation's biggest listed lender, lost 0.20 yuan, or 2.99 percent, to 6.49 yuan. China Merchants Bank Co, the nation's seventh-largest lender, dipped 0.88 yuan, or 2.62 percent, to 36.98 yuan.

Minsheng Banking, the nation's first non-state-owned bank, lost 0.41 yuan, or 2.62 percent, to 15.23 yuan while Bank of China also dipped 0.10 yuan, or 1.68 percent, to close at 5.84 yuan.

China Construction Bank Corp, the country's second-largest lender, surged 32.25 percent from its offer price to 8.53 yuan. The bank raised 58 billion yuan in the world's second-biggest share sale this year.

Property developers continued yesterday's gains today.

China Vanke, the nation's largest publicly traded developer, added 0.54 yuan, or 1.74 percent, to 31.53 yuan. Shanghai-based Shimao Property Holdings also advanced 0.35 yuan, or 1.18 percent, to close at 30.09 yuan.

But Beijing North Star Co, the property arm of Beijing's city government, declined from gains in the morning session and dropped 0.11 yuan, or 0.81 percent, to 13.52 yuan.

China Life, the biggest insurer on Chinese mainland, also gained 2.68 yuan, or 4.75 percent, to close at 59.15 yuan.

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