Hong Kong airport chaos giving huge boost to rivals across the border

Hong Kong

DISRUPTIONS at Hong Kong's international airport are driving big gains in the shares of airports just over the mainland border.

Shenzhen Airport Co soared by the 10 per cent daily limit, while Guangzhou Baiyun International Airport Co rose 4.5 per cent to a record high. They also rallied on Monday, when protests first brought Hong Kong's airport to a standstill and flights were cancelled. Cathay Pacific Airways Ltd, already under pressure from Chinese authorities, extended its decline to trade at the lowest since May 2009.

Citic Securities said that international airlines may re-evaluate Hong Kong's role as an international hub and the flights they allocate there. That will help Shenzhen establish itself as a hub in the longer run, analysts Liu Zheng and Hu Shimin wrote in a note.

Meanwhile, ICBC International Research analyst Zhao Dongchen rated Cathay a "strong sell" and warned of "irreversible damage" to the airline's brand. Mr Zhao's HK$6 (S$1.06) price target implies another 37 per cent decline from the carrier's current level in Hong Kong.

In a notice late on Monday, the Civil Aviation Administration of China said it was boosting transport capacity in airports in the Guangdong-Hong Kong-Macau area to support travel between the mainland and Hong Kong.

China Southern Airlines Co and Air China Ltd could also benefit, Citic's analysts said, as some passengers switch from Hong Kong to Guangzhou and Shenzhen, where they are the biggest carriers in terms of weekly flights.

Air China, Cathay's second-largest shareholder, rose as much as 0.9 per cent in Hong Kong on Tuesday and China Southern advanced 1.4 per cent as the wider market fell. BLOOMBERG