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September 20, 2007

China Eastern Airlines and China Southern Are on Fire

posted by MR WAVETHEORY at 9/20/2007 09:56:00 AM
China Eastern Airlines and China Southern Airlines are topping the biggest gainers list on the NYSE today. A few weeks ago, China Eastern Airlines (NYSE CEA) got an investment from the Government Investment Corp of Singapore and ever since the stock has been on Fire. When the investment was announced, I thought "gee, this stock will probably open at $100". It took a more than a few days, but it got there. Today, it's up close to $30 points. It broke $100 when the stock opened at $110 which is $15 points above the close at $95 yesterday. The other stock that is up alot is China Southern Airlines Limited (ADR) (NYSE ZNH) which is up a respectable $15, not yet over $100 but getting there!

China Southern focuses on Hong Kong and Macau routes where China Eastern focuses on Shanghai. These two are moving because of rumors of restructuring in the aviation industry in China - this could mean either state asset sales or shuffling of smaller regional airlines into these entities. Let me translate that into English for you: ZNH and CEA will get state assets at bargain prices! Anytime you get something for nothing, you create value from thin air. The winner: shareholders! The Chinese government seems to be taking the approach that if you allow people to make money, then they'll have no complaints about state enterprise privatization. Quite the contrary of the Russian privatizations, where only a few people made alot of money (which is not to say there aren't back door deals in China).

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